Activist Elliott names new director at Sensata, anticipated to increase shareholders’ value

Sensata Technologies, an industrial technology company, develops and sells sensors, electrical protection components, and other products for various industries. The company’s Performance Sensing unit serves the automotive and heavy vehicle industries, while the Sensing Solutions unit caters to the industrial and aerospace sectors. With a stock market value of $6.38B, Sensata has been underperforming its peers due to capital allocation missteps, including entering the non-core telematics industry, leading to declining margins and compressed trading multiples.

Elliott Investment Management, an activist investor, is Sensata’s largest investor with an economic ownership of at least $600 million. Elliott has settled for a board seat for Phillip Eyler, president and CEO of Gentherm, as part of a cooperation agreement with Sensata. Eyler will also join the CEO search committee, indicating a potential change in leadership. Sensata has a strong core business making sensors for the auto-supply space, boasting an 80% market share and manufacturing over 1 billion sensors annually, providing a scale advantage and high margins.

In order to create value, Sensata needs to address its flawed capital allocation practices, divest non-core businesses, and take advantage of potential strategic transactions. With a new interim president and CEO appointed, the company is on the path towards rectifying its previous missteps. Additionally, Sensata benefits from a secular tailwind as the demand for its sensors increases with the rise of hybrid vehicles. Elliott has successfully gained a foothold in Sensata by settling for a board seat, signaling potential changes in leadership and strategic direction.

Elliott’s involvement could lead to further changes within Sensata, potentially including the addition of an Elliott executive to the board to evaluate acquisition offers. Sensata’s stock price underperformance has created an opportunity for value creation through strategic initiatives and operational improvements. With the right leadership in place and a focus on core business strengths, Sensata has the potential to turn its performance around and deliver value to its shareholders.