Barington Capital's Battle for Control: Can Strategic Activism Revive Matthews International?

The stakes are high for shareholders as Barington Capital's proxy contest at Matthews International (MTWS) reaches its climax, with implications for both governance and value creation. After a contentious battle, shareholders rejected Barington's nominees in February 2025, but the fallout underscores the challenges facing MTWS as it navigates underperformance in core segments and a shifting strategic landscape. This article examines the activist's motives, the company's defenses, and the path forward for investors weighing risks and opportunities.

Barington's Play for Control: A Question of Valuation and Leadership

Barington Capital's push for board seats was rooted in its belief that Matthews' intrinsic value was significantly undervalued. The activist firm argued that the company's stock price—down 12% year-to-date as of early 2025—reflected managerial missteps, including slow progress on cost savings and an overreliance on underperforming divisions like Industrial Technologies. Barington's director nominees, including James Mitarotonda, sought to accelerate strategic initiatives such as asset sales, portfolio optimization, and debt reduction.

However, Matthews' defense hinged on its recent success in selling SGK Brand Solutions to SGS & Co. for $350 million upfront, far exceeding Barington's earlier valuation of $300 million. The transaction, which retains a 40% stake in the new entity, is projected to deliver $50 million in annual synergies and reduce net debt—a clear rebuttal to Barington's claims of managerial ineptitude.

Matthews' Response: Strategic Execution or Defensive Posturing?

Matthews framed the proxy battle as a choice between continuity and disruption. The company highlighted its strong fiscal 2024 results, including $1.8 billion in revenue and improved margins, while emphasizing its board's expertise in industrial sectors and financial governance. The SGK sale, described as a years-in-the-making strategic move, underscored its ability to generate value without external interference.

Yet, the company's Q2 2025 financials reveal vulnerabilities. Consolidated sales dropped 9.3% year-over-year to $427.6 million, driven by declines in Industrial Technologies (down 30%) and Memorialization (down 7.5%). Net loss widened to $8.9 million, with adjusted EBITDA falling 9.5% to $51.4 million. While cost-cutting initiatives are on track to exceed $50 million in annual savings, the Memorialization segment's reliance on post-pandemic mortality trends and the Industrial division's struggles in energy storage solutions highlight execution risks.

The Implications of Prolonged Activism

While Barington's proxy bid failed, the campaign has already exacted costs. Matthews spent $4.5 million in Q2 2025 on legal and advisory fees tied to the dispute, and the distraction of managing activist pressure may have slowed progress on core initiatives. The company's stock price—already underperforming—could remain volatile as investors weigh its strategic pivots against near-term challenges.

Investment Considerations: Turnaround or Stagnation?

Bullish Case:
- SGK Upside: The transaction's $250 million cash infusion will strengthen liquidity and reduce leverage, potentially enabling share buybacks or dividends. The 40% stake in the new entity could yield upside as SGK's brand solutions business grows.
- Cost Discipline: Savings from restructuring programs are materializing, with adjusted EBITDA margins showing resilience despite revenue declines.
- Industrial Tech Recovery: A surge in customer quotes for energy storage solutions (over $100 million since February 2025) hints at a rebound in this segment.

Bearish Risks:
- Segment Vulnerabilities: Memorialization's sales are tied to demographic shifts and cemetery demand, which may not recover quickly. Industrial Technologies' reliance on cyclical energy markets introduces volatility.
- Shareholder Dissatisfaction: Barington's persistence could signal broader investor skepticism about MTWS's ability to execute on its strategy.
- Debt Dynamics: While SGK proceeds will reduce leverage, the company's $815 million long-term debt remains a drag on returns until further deleveraging occurs.

Conclusion: A Wait-and-See Approach

Matthews International's outcome hinges on whether the SGK transaction and cost initiatives can offset underperformance in its core businesses. Investors should monitor Q3 updates on SGK's operational integration, EBITDA recovery in Industrial Technologies, and debt reduction progress. While the company's defense of its board reflects managerial confidence, sustained stagnation in key segments could reignite activist pressure or a broader sell-off.

For now, the stock presents a high-risk, high-reward scenario. Bulls may view the $350 million SGK deal as a catalyst for turnaround, while bears caution that structural issues in legacy divisions remain unresolved. Until clearer signs of margin stabilization and top-line growth emerge, a cautious “hold” stance—paired with close tracking of MTWS's strategic execution—is prudent.

Investors seeking exposure to industrial turnaround stories should balance MTWS's potential against peers with stronger near-term fundamentals. The coming quarters will determine whether strategic activism's wake leaves behind a revitalized company or a lingering underachiever.