Wednesday, August 27, 2008
As of June 30, 2008, Steel owned 12,456,300 shares at an average cost of $10.51/share. Assuming the deal goes through, Steel will realize a hefty $84M gain on their four year investment.
Steel began pressuring IKN in June 2007 to do a $850M share buyback at $17.50/share. After Steel announced their intention to obtain board representation, IKN announced (in November 2007) a $500M buyback - which included a $295M dutch auction between $13 and $15/share and the balance to be purchased on the open market over the next year or so. As a result, Steel signed a standstill agreement and agreed not to seek board representation through 2009.
IKN ran into a little difficulty a few months later after a bad quarter and after having their credit rating downgraded by S&P. In March 2008 IKN scaled back the previously announced share buyback and disclosed that their standstill agreement will Steel will expire as a result - leaving Steel open to nominate directors to the board this year.
No doubt, feeling ongoing pressure by Steel (and other activist shareholders holding 5%+ of IKN's stock), IKN's board actively pursued strategic alternatives that included this sale.
Tuesday, August 26, 2008
|Barington Capital||Knightspoint||Relational Investors|
|Breeden Capital||Lawndale Capital||Riley Investment Management|
|Bulldog Investors||Liberation Investment||RLR Capital|
|Cannell Capital||Lion Fund||SAC Capital|
|Carl Icahn||Locksmith Capital||Sandell Asset Managament|
|Chapman Capital||Loeb Arbitrage||Shamrock Activist Value Fund|
|Clinton Group||MFP Investors||Steel Partners|
|Costa Brava||MMI Investments||Steel Partners (Japan)|
|Crescendo Partners||Monarch Activist Fund||Strategic Turnaround Partners|
|Dalton Investments (Japan)||Nanes Balkany Partners||Sun Capital|
|Discovery Equity Partners||New Mountain Capital||TCI|
|Elliott Associates||Newcastle Capital||Third Point|
|Firebrand Capital||Nierenberg Investment||Trian Fund|
|FrontFour Capital||Obrem Capital||ValueAct Capital|
|Gamco Investors||Oliver Press Partners||Wattles Capital|
|Greenlight Capital||Owl Creek||Western Investment|
|Harbinger Capital||Pershing Square Capital||Wintergreen Advisers|
|Ironfire Capital||Pirate Capital||Wynnefield Capital|
|Jana Partners||Ramius Capital|
Friday, August 22, 2008
At first glance it’s tough to believe there is any merit to the argument that CVS’s $71.50 per share all-cash offer to purchase Longs Drug Stores Corporation (Ticker: LDG) last week represents less than full value. Especially considering the fact that the offer represents a 32% premium over the previous close and a 22.5% premium for ANY shareholder that bought the stock within the past five years (LDG 5-Year high was $58.37 on May 22, 2007).
Activist Investors Believe Long’s is worth More
On August 5th
Following the announced transaction, Pershing Square – who is well known for their activist investing in retail companies holding valuable real estate assets (i.e. Sears, Target, Borders, etc…), hired Blackstone Group to examine whether there is more value in LDG remaining independent (and monetizing their real estate assets themselves) or being sold to a competitor like Walgreen’s.
Separately, institutional investor Advisory Research, Inc. (who owns 9.7% at an average cost of $38.50), changed their filing status with the SEC this week from “13G - passive” to “13D - active” and disclosed they will need more information about the value of the company’s real estate assets before they will vote in favor of the transaction.
CVS and Long's Need their Votes
Once again, (as all things related to activist investing tend to do) it all comes down to the shareholder votes. And since at least 2/3rds of the outstanding shares must be tendered for the transaction to be successful, one of a few things are likely to happen (1) CVS and LDG successfully convince shareholders the deal is adequately valued (which seems unlikely since the stock has consistently traded above the offer price since the announcement), (2) CVS increases the offer with a price that satisfies the activists, (3) the deal gets blocked and Pershing Square steps in to help monetize the assets, or (4) an unsolicited competitive offer drives up the price.
However, this last option is fraught with problems. Under the terms of the agreement LDS is unable to competitively shop the deal and must pay CVS up to $125 million if the merger is terminated.
Under the terms of the tender offer, shareholders have until September 15th to tender their shares.
Wednesday, August 20, 2008
Steel Partners Wins 5 of 7 Board Seats at PBSO.PK; Could be Bigger Win for Activist Investors Politically
One interesting development is this: General Tony McPeak, one of Steel's elected nominees, is one of a dozen co-chairman for Barack Obama's Presidential election campaign. As a former US Air Force Chief of Staff and a four-star General, McPeak has offered Obama his thoughts on foreign policy and military issues.
Besides being a central figure in Obama's election campaign, McPeak serves on several board of directors at defense-related companies, including two companies controlled by Steel Partners - Del Global Technologies and Point Blank Solutions.
If Obama is elected to the office of the President, McPeak will certainly be appointed to a favorable political position within the new administration. And although it is unlikely he will play a key role in the financial services sector, his relationship with hedge fund activism and "shareholder-friendly" corporate governance could have a behind-the-scenes influence on certain SEC hot-topics, including: say-on-pay and shareholder access to proxy materials.
Thursday, August 14, 2008
This Must be a First! - A law firm is proposing a class action because an activist filed a 13D just before a merger was announced.
In the complaint (click here to download the complaint) the law firm is suggesting that Longs' board of directors may have breached their fiduciary duty by entering into a merger agreement with CVS just days after activist investor Pershing Square Capital filed a 13D disclosing a 21.5% economic stake in the Company. (Pershing owns 8.8% of the stock and the balance in cash-settled swaps)
The complaint alleges that Pershing's announcement effectively made Longs susceptible to offers from potentially interested bidders because Pershing stated in their 13D filing that they they "may engage Longs in strategic discussions". -- Language that is fairly boilerplate in all of Pershing's 13D filings.
Following the announcement earlier this week Longs stock gained 31% and hit a record high of $70.94 - closing the gap between the previous days close of $54.56 and the cash offer of $71.50.
It is estimated that Pershing Square will realize a gain north of $500M on their investment.
Just last week we blogged on the battle between Steel Partners and Point Blank Solutions (PBSO.PK). Brief Background: Steel offered to purchase Point Blank for $5.50/share earlier this year . After being rebuffed by the board as too low an offer (BTW - PBSO is currently trading around $2.50/share), Steel announced their intentions to replace a majority of the board at the annual meeting. The Company hired Wachovia to review strategic alternatives, including a sale, and postponed the annual meeting until the process is complete. Steel sued, attempting to press the Company to hold the meeting sooner than later. The Delaware Court of Chancery allowed the postponement of the meeting - with one caveat -- the Company could not postpone the meeting again without the Court's approval. In an effort to press their luck once more, PBSO petitioned the Court to postpone the meeting again until November. This petition was denied yesterday.
Based on our understanding of the situation, we believe Steel Partners is positioned to win the proxy contest and replace 5 of 7 board members at the annual meeting. We believe this to be the case even though two prominent proxy advisory services (Glass Lewis and Risk Metrics - ISS) recommended shareholders vote for the incumbent directors.
Below is our completely unscientific shareholder vote projection:
Anticipated Votes for Steel Partners' Nominees
David Brooks (PBSO's former CEO) 16.1%
Steel Partners 9.6%
Other Activist Hedge Funds 16.7%
Retail Shareholders 10%
Estimated Total = 52.4%
Anticipated Votes for Point Blank's Current Board
Terry Brooks (ex-wife of PBSO's former CEO) 5.9%
Institutional Investors <2%
Retail Shareholders 30%
Estimated Total = 38%
Tuesday, August 5, 2008
The 2008 Directors Forum of The University of Minnesota Law School
Martin Lipton, Partner
Wachtell, Lipton, Rosen & Katz
The Paper is Available Here
Equity and Debt Decoupling and Empty Voting II: Importance and Extensions
The University of Pennsylvania Law Review, January 2008
Henry Hu & Bernard Black
The Paper is Available Here
Hedge Fund Investor Activism & Takeovers
Harvard Business School, July 2007
Robin Greenwood & Michael Schor
The Paper is Available Here
Hedge Fund Activism, Corporate Governance and Firm Performance
Alon Brav, Duke University
Wei Jiang, Columbia University
Frank Portnoy, University of San Diego
Randall Thomas, Vanderbilt University
The Paper if Available Here
Hedge Fund Activism
April Klein, New York University
Emanuel Zur, New York University
The Article is Available Here