Relational Investors Files Amended 13F and new 13D Disclosing Position in FlowServe (FLS)

Activist investment fund Relational Investors has amended its Q1 2012 13F to include a position in FLS.  They owned 2,065,605 shares of FLS on March 31st of this year.  Relational also filed a Schedule 13D today revealing that the position has gone up to 3,086,789 shares as of June 14th.  In the filing they also state that shares are undervalued and they

believe the Company’s share price does not adequately reflect the potential for significant earnings and cash flow growth.
The Reporting Persons believe improvements in a number of areas will further enhance the Company’s equity valuation. Since their initial investment in February 2012, the Reporting Persons have maintained a dialogue with the Company’s management and have presented their views and concerns regarding (i) strategic positioning, (ii) operational improvements, (iii) capital structure, and (iv) capital allocation. The Reporting Persons have recently intensified their communications around certain of these topics and believe the Company has taken, and will continue to take, actions to improve its performance in these areas.
Strategic Positioning
The Reporting Persons believe strategic investments made by the Company over the last three years to improve its high margin aftermarket product and service offerings are underappreciated. The Company’s aftermarket business represents 40% of total company revenues and has exhibited lower volatility and significantly higher margins than its original equipment revenues. The Reporting Persons believe the Company’s plan to expand its aftermarket presence will reinforce earnings growth stability and margin improvement. The Reporting Persons believe that the Company’s strategic position will enable it to capitalize on a recovery in its core end markets.

From Yahoo! Finance, Flowserve Corporation engages in the design, manufacture, distribution, and service of industrial flow management equipment.