Activist hedge fund Relational Investors LLC has put The Home Depot Inc.'s board and executives on notice. The last time Relational called out executives who resisted its efforts to change strategy, the CEO ended up at the unemployment office.
On Wednesday, Relational, which owns about 12.9 million Home Depot shares, sent a letter to the retailer's CEO Robert Nardelli telling him that the firm has established an advocacy program to turn around six years of under performance at the company. Relational's letter did not outline any guidelines for change, but Relational said it would like to discuss its ideas with Nardelli and the board at their "earliest convenience." In addition, Relational indicated in the letter it will seek at least one board seat at the 2007 annual meeting.
Earlier in the year, Relational opposed Sovereign Bancorp's plan to sell a 19.8% stake to Spain's Banco Santander Central Hispano SA for $3.6 billion. While Sovereign and BSCH closed the deal, Relational still won representation on Sovereign's board of directors. A few months later, CEO Jay Sidhu, who had overseen Sovereign's transformation from a Pennsylvania savings bank into a regional powerhouse over 17 years, was fired.
Early response from Home Depot seems to be resistance toward Relational, forcing the question: Will Nardelli find himself unemployed by the end of 2007? —Matthew Wurtzel
See story from MarketWatch
See press release and letter via Yahoo!
See earlier posts about Home Depot from Dealscape
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