Sun activist shareholder to get payday?

Southeastern Asset Management, which holds a 22 percent stake, said last fall that it would engage in talks with not only Sun's management but also third parties.

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Update at 9:13 a.m. PDT, with IBM comment and Sun's stock price.

With Sun Microsystems reportedly in merger talks with IBM and its stock soaring as high as 83.7 percent in morning trading, Sun's largest shareholder may find its activist role is paying off.

Southeastern Asset Management, which holds a 22 percent stake, announced in October that it was seeking an active role in the company and would engage in talks with not only Sun's management but also third parties, in an effort to maximize shareholder value.

That was followed in December with an announcement that Southeastern would gain two seats on Sun's board of directors .

In landing two board seats, Southeastern's vice president and principal, Jason Dunn, noted:

Southeastern adding two directors to (Sun's) board further strengthens our conviction that Sun will take maximum advantage of all its opportunities for customers and for shareholders.

Shares of Sun jumped as high as $9.13 per share in morning trading, valuing the company in excess of $6.7 billion. But based on Tuesday's close, before news of reported merger talks surfaced, Sun closed at $4.97 a share with a market cap of $3.7 billion.

IBM is reportedly considering a cash deal of at least $6.5 billion, according to a report Wednesday in the The Wall Street Journal, which first reported the merger talks.

Sun's stock--the blue line here--slumped through 2007 and 2008, and through that time has been underperforming the broader markets.

Since October 2007, Sun's stock has headed southward and underperformed the broader markets. And in the fall, it dipped below $5 a share, further compounding its problems in attracting institutional investors.

For Southeastern, which has a reputation of wearing a velvet glove with the companies in its portfolio, the decision to take an activist role in Sun may ultimately pay off should the deal with IBM go through.

Southeastern and Sun were not immediately available for comment. IBM declined comment.

 

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