Starboard Delivers Letter to Knife River Board, Targeting 22% Margin in 2029
Key Facts
Starboard Value announced on October 30 that it had delivered a letter to Knife River’s board of directors, the latest development in the activist shareholder’s campaign against the company. The announcement follows an earlier letter Starboard said it sent to Brian Gray, Knife River’s CEO, with a copy to the board. The details of the October 30 letter could not be verified; the announcement therefore confirms only that the letter was delivered, while the known demands date to Starboard’s September 24 statement. In that statement, Starboard described itself as a fundamental investment adviser and said it engages with management teams and boards to discuss opportunities to unlock shareholder value. The available developments show that the stated focus of the dispute is raising margins and assessing the value of the company’s assets.
Starboard set a target of raising adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margin to 22% by fiscal 2029. It said the path to that goal includes improving aggregate pricing and making meaningful cost cuts, steps that link pricing with expense control in the company’s business. It presented the target in its September 24 statement, not as a new demand in the October 30 letter. The figure sets a clear benchmark against which Starboard’s proposed operating plan can be measured. It also ties the discussion of Knife River’s performance to its ability to expand margins, alongside revenue growth and business volume.
Starboard urged Knife River to evaluate strategic alternatives, citing what it described as the scarcity and strategic value of the company’s assets. The statement did not specify an outcome for that review, but added a strategic option to its demands for improved operating performance. According to a Reuters report published on October 19, Starboard was preparing to nominate board members as part of pressure to improve margins or explore a sale of the company. The report said Knife River had a market value of $2.8 billion and its shares had fallen 24% over the previous twelve months. These moves and assessments remain background to the campaign, and none establishes that the company has decided to sell assets or change its board.
Reuters noted that Knife River’s margin was about 15% in the quarter ended June 30, compared with margins of about 30% at peers. The gap shows the scale of the challenge underpinning the profitability debate, as Starboard calls for an adjusted margin of 22% by fiscal 2029. On results, the company reported revenue of $938.6 million in the second quarter of 2026, up 13% from the same period a year earlier. But net income fell 13% to $43.9 million, compared with $50.6 million in the second quarter of 2025. The figures combine sales growth with a decline in net income, while margin expansion remains a stated focus of Starboard’s campaign.
Knife River said it learned of Starboard’s investment on September 22 and would engage with the firm to understand its views. The company thus confirmed the start of communication with the investor, without expressing support for Starboard’s proposals or a commitment to implement them. The response comes amid the investor’s call for a review of performance and strategic alternatives. At the same time, Knife River gave a fiscal 2026 revenue outlook of between $3.4 billion and $3.6 billion, and maintained its adjusted EBITDA forecast at between $520 million and $560 million. It also expects aggregate sales volume to rise by a high single-digit percentage and prices to increase by a mid-single-digit percentage in 2026.
Knife River will report third-quarter 2026 results on November 3, days after announcing delivery of the letter. The results date is the next near-term operating development amid the investor’s discussion of margins and its proposals to improve them. The quarterly results will provide new figures on the company’s performance in the period that ended in September, while the announced revenue and earnings outlook remains for fiscal 2026. Available trading data showed Knife River shares closing at $57.6 on October 29, compared with $54.25 in the previous session. The data do not include the opening price or the session high and low.