Activist hedge fund Starboard Value has acquired a significant stake in Solstice Advanced Materials, a specialty chemicals company recently spun off from Honeywell, as Solstice seeks to regain shareholder confidence following the collapse of a major acquisition deal.

Starboard’s founder and CEO, Jeff Smith, stated that investors had grown skeptical about Solstice’s strategic direction, perceiving that the company was prioritizing expansion over maximizing shareholder value. The planned $14.5 billion cash-and-stock acquisition of Element Solutions, announced in July, had caused most of Solstice’s earlier stock gains to dissipate. The deal was ultimately abandoned in late August ahead of a critical shareholder vote, due to concerns over limited synergies between the two companies and the premium Solstice would have paid relative to Element’s current earnings multiple.

Following the failed merger, Solstice’s shares declined sharply and have not recovered to pre-announcement levels, although the stock remains approximately 25 percent higher than on its initial post-spinoff trading day last October, valuing the company at around $9.4 billion. Starboard’s investment, reportedly worth several hundred million dollars, places it among the company’s top 10 shareholders. Following news of Starboard’s involvement, Solstice’s stock rose by 4.7 percent.

Smith emphasized the need for Solstice to refocus on operational execution within its core businesses—primarily its refrigerants and nuclear divisions—while reducing about $100 million in corporate overhead expenses. He highlighted Solstice’s nuclear business as a key growth area, citing its role in supplying chemicals essential for uranium enrichment amid what he described as a “long-term nuclear renaissance.”

Starboard, managing assets of approximately $8.2 billion, is known for its active investor approach and has previously engaged with large companies such as Bristol Myers Squibb, Salesforce, and Kenvue. Smith indicated that the fund intends to hold Solstice’s management and board accountable for delivering improved results and enhancing shareholder value, viewing the current situation as a significant opportunity.

Solstice did not provide comments in response to requests. The company’s earlier attempt to expand through acquisition appeared to have alienated investors, who remain cautious about Solstice’s capital allocation strategy. The aborted deal and resulting market reaction have underscored the challenges facing the company as it navigates its path forward.