Remy International, Inc. (NASDAQ:REMY) has been forced to sell itself to BorgWarner Inc. (NYSE:BWA) for $29.5 a share indicating more than 40% premium from Friday’s closing price. It would not have come through but for the sustained efforts from the activist hedge fund firm, H Partners. The hedge fund always remained a passive investor and waited for years for the return on investments. It rarely comes into the picture unless the situation warranted.
Bumpy Ride
Remy International, Inc. (NASDAQ:REMY) has been going through a patchy ride in the recent past. The company was battered and bruised by the Great Recession leading to a sharp fall in vehicle sales apart from putting the complete sector into a financial mess. The company was rescued by Fidelity National Financial that acquired 47% stake in the company four years ago. As a result, the company was able to cut its debt by about 40% or $211 million.
In the last quarter of the year 2012, H Partners has acquired 9.1% stake in Remy International, Inc. (NASDAQ:REMY). That was after the company’s stock started limping back to $15 – $16 a share. The hedge fund waited for some time before turning into an activist and its executives were accommodated in the board in February. A few months later, the auto parts maker found a premium for its stock.
Boosts Stake
Before H partners investment, Fidelity National Financial improved its stake in the company to 50.2%. That meant that the insurer have the controlling power with 50.2% stake. The insurer also came under the pressure from its investors. Berkshire Hathaway Inc. (NYSE:BRK.A) started criticizing the insurance firm and advised it to spin off its investments in favor of the shareholders directly. The process of Fidelity National holding was spun off.
At this point of time, H Partners turned into an activist investor and shaped the company’s tactics. That landed in BorgWarner Inc. (NYSE:BWA) in acquiring Remy International, Inc. (NASDAQ:REMY).
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