Starboard builds a stake in Knife River and pushes for a sale or higher margins; stock rises after hours

Activist investor Starboard Value has built a significant stake in Knife River (KNF) and plans to push the construction materials company to improve its margins or explore a sale, The Wall Street Journal reported Wednesday, citing people familiar with the matter. Starboard believes the business has high barriers to entry and could attract buyers, and wants Knife River to commit to narrowing the gap between its EBITDA margins and those of peers over the next few years, according to Reuters' summary of the report. Neither company responded to Reuters' requests for comment.

The report landed after a bad day. Knife River closed at $51.51, down 7.7%, after touching $50.685, below its prior 52-week low of $53.59, Nasdaq data show. Its 52-week high is $96.28. In after-hours trading the stock was at about $53.50 at 7:31 p.m. ET, up 3.9%, according to Nasdaq, after Seeking Alpha reported a rise of as much as 5.3%.

The margin problem, in the company's own numbers

Knife River's second-quarter release shows the tension Starboard is targeting. Revenue rose 13% to $938.6 million, but adjusted EBITDA slipped to $139.7 million from $140.8 million, and the adjusted EBITDA margin fell to 14.9% from 16.9%. Management blamed energy costs, delayed projects and the mix of contracting work. Aggregate prices were up 8% on a mix-adjusted basis, so this was not a pricing problem.

The two-point drop overstates the slide. Chief executive Brian Gray noted that last year's quarter included $10.3 million of gains on asset sales, against $650,000 this year. Take those out of both periods and the margin goes from about 15.7% to about 14.8%, our calculation. That is a decline of under one point, not two. The West region is where it went wrong: revenue fell 9% and EBITDA 19% on less public-agency work in Oregon and delays in Hawaii and Alaska.

What one margin point is worth

Knife River guides to 2026 revenue of $3.4 billion to $3.6 billion and adjusted EBITDA of $520 million to $560 million. At the $3.5 billion midpoint, each percentage point of margin is about $35 million of EBITDA.

At Wednesday's close the market value was about $2.92 billion, per Nasdaq. Add net debt of $1.59 billion at June 30 and the enterprise value is about $4.52 billion, roughly 8.4 times the midpoint of EBITDA guidance. At that multiple, $35 million of extra EBITDA is worth about $290 million, or roughly $5 a share on the approximately 56.8 million shares implied by the market value and closing price. All of those are our estimates from the company's figures. That is the arithmetic behind an activist's margin campaign: closing even part of a peer gap moves the stock more than the day's 7.7% fall.

The debt cuts the other way. Net leverage was 3.2 times trailing EBITDA in June after $184.4 million of acquisitions in the first half, which limits how much Knife River can buy back stock to answer Starboard on its own.

Who notices on the ground

Knife River sells aggregates, ready-mix and asphalt and does paving work in states from Alaska and Hawaii to Texas and Minnesota. A margin push usually starts with price, and management already lists "price optimization" among its self-help measures. For a site-work or paving contractor who buys stone and asphalt from a local Knife River plant, that is the line to watch in next season's bids. A sale to a larger materials company would change little at the quarry gate in the short run, but it would shrink the number of independent suppliers in some local markets.

Sources: The Wall Street Journal via Seeking Alpha and Reuters (summary); Knife River Q2 2026 release (SEC); Nasdaq quotes. Valuation and margin figures are our calculations. This is market information, not investment advice.