Greenberg: Activist Stock Investor Losing Patience with CVS

Look for Relational Investors, one of the largest shareholders of National Semiconductor, to possibly get more aggressive with its stake in CVS Caremark.

Relational, an activist investor co-led by Ralph Whitworth, has been on a roll lately, with three its 21 portfolio companies engaged in deals: in addition to the National transaction, ITT, which earlier this year said it was breaking itself apart; Genzyme, which is being bought by Sanofi-Aventis. And National, which announced this week it was being bought by Texas Instruments. (You can see Relational’s entirepublic portfolio here).

Most of the firm's other investments, including Intuit, Deere & Co. and McDermott, have experienced strong runs. Even the likes of insurer Unum Group and Gildan Activewear, which have languished lately, are considerably above where they were when Relational originally invested.

Enter CVS — the only stock in Relational’s portfolio that hasn’t budged much since Relational bought its stake around a year and a half ago.

Relational owns a 1.5% stake valued at around $700 million. One source close to Relational says the firm, which specializes in shaking the cages at companies it believes are undervalued, believes the stock’s poor performance proves merger simply didn’t work. And among all of Relational’s holdings, according to this source, the frustration is highest at CVS – where so far Relational and its co-founder, Ralph Whitworth, have taken a low public profile. But Relational is said to be running out of patience.

The source further says both sides recently met, with little resolve.

Possible outcomes, this source said, would be an outright sale of the company or spinning off or selling Caremark, the pharmacy benefits company, with the upside coming from “running the retailer for cash.”

For its part, CVS says it does not respond to market rumors.

Programming note: I'll have more on "Squawk on the Street."

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