Seeking to Force Changes at Mellanox, Activist Investor Starboard Met with Israeli Investors

Representatives from New York-based hedge fund Starboard Value LP visited Israel last week to meet with some of the major shareholders of Mellanox Technologies Ltd., including institutional investors, two people familiar with the matter who spoke on conditions of anonymity told Calcalist.

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Starboard bought a 10.7% stake in the Israel-based chipmaker in November. Since then, the activist investor has castigated Mellanox for its over-the-top executive and research and development expenses. Two weeks ago, Starboard announced its intention to replace all current nine members of Mellanox’s board of directors with its own candidates, a move that will require significant support from Mellanox’s shareholders.

In Israel, Starboard’s representatives met with people from insurance company Menora Mivtachim Group, which holds a 3.6% stake in Mellanox, Clal Insurance, which holds a 2.3% stake, and insurance company the Phoenix Holding Ltd., which has a 1% stake, the two people said.

Another one of Mellanox’s biggest shareholders, software multinational Oracle Corporation, has dropped below the party at interest threshold since the beginning of January. The two companies have had a long-term strategic partnership. Oracle has reduced its stake in Mellanox from the 10.2% it acquired in 2010 to 4.33% between January 16 and January 22, according to the company’s Security and Exchange Commission filing.

Mellanox develops and manufactures chips for communication networks in data centers. Founded in 1999, the company employs some 2,700 people, mostly in Israel. Mellanox’s stock is currently up 29% since Starboard made its acquisition announcement. Earlier this month, Mellanox published financial reports that surpassed analysts’ expectations on all key metrics.