Matthews International: A Strategic Board and Hidden Value in Energy Storage

Matthews International (NASDAQ: MATW) faces a pivotal moment as it navigates activist pressure from Barington Capital while unlocking latent value across its three core segments: memorialization, industrial technology, and brand solutions. The company's recent defense of its board nominees—backed by GAMCO Asset Management's vocal support—signals a strategic commitment to long-term value creation. With a technical board steering cost-cutting initiatives and capitalizing on a landmark legal win in its Tesla arbitration, Matthews is primed to capitalize on growing demand for energy storage solutions. Here's why investors should vote FOR the company's nominees and consider this stock a compelling buy.

A Board with Strategic Vision and Technical Expertise

While specific technical backgrounds of directors aren't detailed, Matthews' success in defending its Dry Battery Electrode (DBE) technology against Tesla's legal challenges underscores the board's deep industry expertise. The February 2025 arbitration ruling affirmed Matthews' rights to market and sell DBE globally—a validation of its decade-long R&D efforts. This technology, which slashes production costs by 75% and eliminates solvent-based processes, positions the company as a critical player in the $100 billion EV battery market.

The board's focus on operational continuity is further evident in its dual-track strategy:
1. Cost Reduction: A $50 million savings program targeting overheads and inefficiencies, including $250 million in upfront cash from spinning off its SGK Brand Solutions segment into a joint venture.
2. Growth Prioritization: Redirecting capital toward high-margin industrial tech (e.g., DBE) and memorialization, which benefits from stable demand for funeral services.

GAMCO's endorsement of Matthews' nominees—despite Barington's push for change—reflects confidence in the board's ability to execute. As GAMCO noted, “The current leadership has navigated complex challenges, including litigation and strategic reorganization, with discipline.”

Tesla Arbitration Ruling: A Game-Changer for Energy Storage Growth

The February 2025 arbitration victory removed a major overhang, enabling Matthews to immediately market DBE solutions to global battery manufacturers and automakers. This ruling not only validated its IP but also opened access to markets previously restricted by Tesla's claims.

While Tesla's stock has fluctuated amid macroeconomic uncertainty, Matthews' shares rose 15% post-ruling, reflecting investor optimism. Analysts project DBE could add $100 million+ in annual revenue by 2026, driven by partnerships with automakers and battery producers.

The company's U.S. Patent No. 12,136,727 B2 further solidifies its competitive moat, protecting DBE systems from imitation. This tech advantage aligns with Bank of America's analysis, which highlights cost-competitive EV batteries as a critical growth lever.

Cost Cuts and SGK Spin-Off: Fueling Financial Flexibility

The SGK spin-off, expected to close by mid-2025, will reduce net debt by over $250 million and unlock synergies exceeding $50 million annually. Combined with the $50 million cost-savings program, this positions Matthews to:
- Reinvest in high-growth DBE projects.
- Boost shareholder returns via dividends (currently $0.25/quarter).
- Weather macroeconomic headwinds, such as EV demand volatility.

First-quarter 2025 results, though hampered by litigation costs and Tesla project slowdowns, underscore resilience. Adjusted EBITDA dipped to $40 million (vs. $45.5 million in 2024), but the board's focus on long-term metrics—such as deleveraging and segment diversification—remains intact.

Why Vote FOR the Nominees?

Barington's push to replace board members risks destabilizing a team that has:
1. Navigated Legal Complexity: Successfully defended DBE's IP against Tesla's aggressive claims.
2. Executed Strategic Restructuring: The SGK spin-off and cost-cutting align with shareholder interests.
3. Balanced Risk: Maintained a diversified revenue stream (40% from memorialization, 30% from industrial tech) amid EV market uncertainty.

GAMCO's support—backed by its 5% stake—signals that activist interference could disrupt this progress. As the board stated, “Continuity is critical to executing our DBE growth strategy and delivering shareholder value.”

Investment Thesis: Buy MATW for Long-Term Value

Bull Case: DBE partnerships drive $150 million in EBITDA by 2026, pushing shares to $45–$50 (CJS Securities' target).
Base Case: SGK synergies and cost cuts stabilize margins, with shares rising to $35–$40 as debt declines.
Risks: Execution delays in DBE scaling, EV battery tech competition, and macroeconomic slowdowns.

Recommendation: Vote FOR Matthews' nominees and accumulate the stock at current levels (~$25). The board's focus on operational continuity, IP protection, and capital discipline positions MATW to outperform as energy storage demand surges.

Matthews International is at a crossroads: embrace activist disruption or capitalize on a legally validated, high-margin opportunity in energy storage. The board's record and GAMCO's backing suggest the latter path is the right one. Investors who align with this vision could reap rewards as DBE technology powers the EV revolution.