Irenic has met with management to ask for changes
Megatrends likely to fuel growth for sensors and safety systems business
Shareholders worry about company's forecast costs
By Svea Herbst-Bayliss
NEW YORK, Feb 24 (Reuters) - Irenic Capital Management has built a sizable stake in Ralliant RAL.N and wants the precision technology maker to cut costs, buy back more stock at a faster pace and focus more on its defense and electronics business, two sources familiar with the matter said.
Irenic owns roughly 2% of Ralliant and has met with management numerous times to discuss possible changes to help the $4.7 billion company perform better, according to the sources who are not permitted to discuss the private talks.
A company representative was not immediately available for comment.
Specifically, the New York-based hedge fund wants the Raleigh, North Carolina-headquartered company to commit to buying back more stock.
The company had said again in early February, when it announced earnings, that the board's repurchase authorization of $200 million made last year "remains fully available." Irenic however feels the company could announce a larger buyback and an accelerated share repurchase program, a fast, contract-based method for a company to buy back a large volume of its own shares immediately, the sources said.
Irenic is also pushing Ralliant to cut day-to-day operating expenses after the company surprised investors by twice increasing its forecast for costs, including merit increases and other employee expenses.
And Irenic wants the company to concentrate more on its sensors and safety systems business, which contributes roughly 80% of the company's earnings, the sources said. Ralliant's test and measurement business makes up the rest.
Industry analysts have noted that the volatility of the test and measurement business has hurt the company overall, helping push its stock price down 20.5% since Ralliant was spun out of industrial technology conglomerate Fortive FTV.N less than a year ago.
In early February, Ralliant's stock price plunged roughly 30% as investors reacted negatively to indications that future costs would be higher than what shareholders had expected.
Irenic, co-founded by Adam Katz and Andy Dodge, has told other investors and the company privately that its two businesses do not logically fit together, the sources said.
Ralliant's test and measurement business might find a better home with competitors such as engineering services company Emerson Electric EMR.N which purchased National Instruments in 2023, industry analysts have said.
At the same time, the sources noted that Irenic believes the sensors and safety systems business should be able to grow in the high single digits for many years, fueled by megatrends including the rebuilding and maintenance of the U.S. electrical grid and ramping up the country's missile defense system.
Ralliant subsidiary Qualitrol makes sensor components to track the performance of utility electrical assets, including power plants, transformers and towers.
Ralliant's Pacific Scientific EMC unit manufactures pyrotechnic components for missiles and space systems.
Irenic has a history of investing in aerospace and defense companies and it has previously pushed some target companies to separate into more focused businesses or to sell themselves.
Barnes Group, where Irenic urged changes, sold itself to private equity firm Apollo in early 2025.
(Reporting by Svea Herbst-Bayliss; Editing by Lincoln Feast.)
((svea.herbst@thomsonreuters.com; +617 233 2138; Reuters Messaging: svea.herbst.thomsonreuters.com@reuters.net/))
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