Thursday, May 28, 2009

Back from the front line: Mike Levin on Target's Annual Meeting

We attended the Target Corporation's annual meeting today, with the only drama around the temporarily-uncertain outcome of Pershing Square's campaign to elect five directors, including Bill Ackman, who runs PS. In the end, as was publicized, preliminary vote counts indicate that incumbent directors won the vote. The only surprise is the actual vote: PS candidates appear to have won at most a quarter of the votes, much less than most observers expected, and fewer than PS has won in similar contests.

We arrived at a brand new, as-yet-unopened Target in Waukesha, Wisconsin for the annual meeting to find heavy security and abundant media. The meeting itself was cordial, featuring Bill Ackman's speech. Ostensibly in support of his candidates and also an arcane but important shareholder resolution that the Board of Directors consists of 13 rather than 12 positions, he directed his remarks instead to a critique of shareholder voting systems in Corporate America, the low share ownership among Target's incumbent directors, and flaws in the process for nominating directors to stand for election. He quoted John F. Kennedy's inaugural address ("we shall pay any price, bear any burden...") and paraphrased Martin Luther King's "I have a dream" speech, both of which caused him to quite sincerely choke up a bit, a testament to how seriously he takes both his investments and corporate governance in the U.S. Otherwise, the meeting was as cordial as any we have attended.

Most observers thought that PS candidates would do better than they did, especially in light of the support they received from RiskMetrics/ISS and ProxyGovernance. Some at the meeting speculated that a few large institutional owners switched their votes from PS to incumbents because these investors feared they would lose access to company management if they voted against the board-nominated candidates.

When the votes are finally tallied, it'll be interesting to see who voted and how.

Posted by Mike Levin, Hedge Fund Solutions. Mike can be contacted at

All of Target's Directors Elected; Board Set at 12 Members

Based on a preliminary vote count from today's annual meeting, all four of Target's board nominees were elected.

According to Mike Levin from Hedge Fund Solutions (who was at the annual meeting but unable to blog due to a company request) 70% of the votes cast were in favor of Target's nominees and in favor of setting the size of the board at 12 members.

Catalyst Investment Research For Penwest Pharmaceuticals Co. (PPCO)

Click here to download a complimentary copy of Hedge Fund Solutions' Catalyst Investment Research report for Penwest Pharmaceuticals Co. (Ticker: PPCO).

This professional grade research is dedicated to uncovering undervalued publicly traded companies that could have the potential to generate outsized returns due to an activist investors involvement.

Annual subscriptions are now available (a minimum of 24 research reports per year).

Email: if you are interested in subscription information.

Hedge Fund Solutions, LLC is not an investment, legal, or tax advisor, and none of the information available through the Firm is intended to provide tax, legal or investment advice.

April Activist Investments - 58 Companies Targeted

Below is a summary list of 58 companies targeted by 61 shareholder activists during April.

This information was extracted from Hedge Fund Solutions' Catalyst Equity Research Report, a free in-depth weekly research on activist investments.

Click Here to subscribe to the FREE report.

Download the Weekly Reports:

Week Ending April 10, 2009
Week Ending April 17, 2009
Week Ending April 24, 2009
Week Ending May 1, 2009

Ticker Company Investor
ABTL Autobytel Inc Trilogy Enterprises
AMLN Amylin Pharmaceuticals Carl Icahn
ASPM Aspect Medical Systems First Manhattan Co
ASUR Asure Software Inc Red Oak Partners
BASI Bioanalytical Systems Peter Kissinger
BBEP BreitBurn Energy Partners, L.P. Baupost Group
BCSB BCSB Bancorp Inc. Financial Edge Fund
CHE Chemed Corp [Download an In-Depth Analysis]
MMI Investors
CHG CH Energy Group Inc GAMCO Investors
CHIC Charlotte Russe Holding Inc KarpReilly Capital Management
CLHI.PK CLST Holdings Red Oak Partners
COHM.PK Coachmen Industries Gamco Investors
CPY CPI Corp Ramius Capital
CWLZ Cowlitz Bancorporation Crescent Capital
DAVE Famous Daves of America Vicuna Advisors
DCS Dreman/Claymore Dividend & Income Fund Bulldog Investors
DFZ R.G. Barry Mill Road Capital
ENTU Entrust Inc. Empire Capital
ENZN Enzon Pharmaceuticals Inc. DellaCamera Capital Management
FACT Facet Biotech Corporation Baupost Group
FBSS Fauquier Bankshares, Inc. William Sudduth
FPU Florida Public Utilities Companyu Energy West
FSS Federal Signal Warren Kanders
GAIA Gaiam Inc Mill Road Capital
GEYH.OB Global Employment Holdings Victory Park Capital
GSIG GSI Group Stephen Bershad
GSLA GS Financial Corp Riggs Qualified Partners
HAR Harman International Industries Relational Investors
IPAS iPass Inc Foxhill Capital
IPAS iPass Inc Ramius Capital
KFS Kingsway Financial Services Inc Joseph Stilwell
KONA Kona Grill Mill Road Capital
MCGC MCG Capital Springbok Capital Management
MEG Media General GAMCO Investors
MLVF Malvern Federal Bancorp Joseph Stillwell
NDD Neuberger Berman Dividend Advantage Fund Bulldog Investor
NMTI NMT Medical Glenhill Advisors
NTN NTN Buzztime, Inc. Trinad Capital Master Fund
OFIX Orthofix International Ramius Capital
OICO OI Corp Mustang Capital Management
OPTV OpenTV Discovery Group
PIF Insured Municipal Income Fund Inc Bulldog Investors
PLCE The Childrens Place Retail Stores, Inc. Ezra Dabah
PWER Power One Bel Fuse
ROY International Royalty Corp Coordinates Capital Corp
RPT Ramco-Gershenson Properties Trust Equity One
SAH Sonic Automotive Paul Rusnak
SLRY Kinderhook Partners
STRM Streamline Health Solutions Eric Lombardo
SUMT SumTotal Systems Vista Equity Partners
SUMT SumTotal Systems Discovery Capital
TDS Telephone & Data Systems GAMCO Investors
TDS Telephone & Data Systems Southeastern Asset Management
TLGD Tollgrade Communications Inc Ramius Capital Group
TMENE.OB Thermoenergy Corp Quercus Trust
TMI TM Entertainment & Media Inc Bulldog Investors
TTSP TransTech Services Partners Bulldog Investors
ULU Uluru Inc. Brencourt Advisors
VSNT Versant Corp Discovery Capital
WOC Wilshire Enterprises Bulldog Investors
WOLF Great Wolf Resorts Hovde Capital Advisors

Wednesday, May 27, 2009

AMLN Preliminary Vote Results

Preliminary results from Amylin's annual meeting suggest one of Eastbourne Capital's director nominees and one of Icahn's director nominees were elected to the Company's twelve person board today. Icahn's shareholder proposal to reincorporate the Company from Delaware to North Dakota was defeated.

Posted by Damien Park, Hedge Fund Solutions

Hedge Fund Solutions will Blog Live from Target's Annual Meeting Tomorrow

Mike Levin from Hedge Fund Solutions will Blog for The Official Activist Investing Blog from Target Corporation's Annual Meeting tomorrow afternoon. If you see Mike there, say hello.

Target’s 2009 Annual Meeting of Shareholders will be held at 1:00 p.m., Central Daylight Time, on Thursday, May 28, 2009 at the Target Store located at 1250 West Sunset Drive, Waukesha, Wisconsin.

Contact Mike at

Proxy Access Rule: Legal Comments

Two of our Blog and Tacklers have issued legal notes on the SEC's recently proposed proxy access rules.

Click here to read Schulte Roth & Zabel's Alert
Click here to read Gibson, Dunn & Crutcher's Alert

Background (provided by SRZ):
On May 20 the SEC voted 3-2 to solicit public comment on proposed rules that will, for the first time, allow shareholders to nominate directors for election by way of the company proxy materials. Generally, proposed Rule 14a-11 would allow shareholders who own 1%, 3% or 5% of a public company’s stock, depending on its market capitalization, to nominate up to 25% of the board seats up for election each year, subject to numerous conditions. In addition, Rule 14a-8(i)(8) would be amended to allow shareholder proposals regarding the director-nomination process. SEC Chairman Schapiro was joined by Commissioners Walter and Aguilar in approving publication of the proposed rules. Commissioners Casey and Paredes dissented, citing concerns over statutory authority and conflicts with state law. The proposed rules will be published in the next two weeks and public comments are due within 60 days thereafter.

Marc Weingarten from SRZ is a regular contributor to this blog. Eduardo Gallardo from Gibson Dunn is also a regular contributor to this blog.

Sunday, May 17, 2009

Target - Pershing Webcast Hosted by RiskMetrics (ISS)

On May 14 RiskMetrics Group (ISS) held a webcast providing Target shareholders a forum in which they could hear from both sides in the contentious battle for board representation.

Speakers for Target included Target's Chair and CEO Gregg Steinhafel, CFO Douglas A. Scovanner, and director nominees Stephen Sanger, Richard Kovacevich and Mary Dillon.

For Pershing Square, speakers included, William Ackman, the firm's founder and board nominee, together with three other nominees: Michael Ashner, Ronald Gilson and Richard Vague.

RiskMetrics' Head of M&A research, Christopher Young, moderated.

Click here to replay the webcast.

Click here to download Pershing Square's presentation material.

Click here to download Target Corp's. presentation material.

Thursday, May 14, 2009

SEC Will Propose 1% 3% and 5% Threshold to Nominate on Corporate Proxy

Bloomberg reported today that the SEC is likely to consider proposing a proxy access rule which will enable shareholders to nominate directors on a corporate proxy. The threshold for nominating directors will be 1% for companies above $700M market cap, 3% for companies between $75M and $700M and 5% for companies below $75M. All nominating shareholders will have to own their shares for at least one year.

Click here to read the Bloomberg article.

Wednesday, May 13, 2009

Not Just for Scholars...

…but also for corporate executives, investors, and their advisors: a rich new source of research, both academic and applied, in corporate governance. The Social Science Research Network (SSRN) has created a separate section dedicated to corporate governance.

For those who don’t know it, the SSRN has become the go-to source for scholarly publications, mainly for academic work-in-progress, but also as a directory to newly-published papers and articles. Michael Jensen, one of the first professors to expound on the conflicts between investors and management, founded it ten years ago as a means of circulating academic working papers electronically. In addition to providing a searchable archive of these papers, members can subscribe to numerous daily email newsletters that announce newly-published or updated papers.

SSRN has now started its Corporate Governance Network (CGN), really a collection of 21 subject matter “eJournals” that cover a wide range of subjects, from economics to law to executive compensation to behavioral psychology. It will also include a section on case studies. Lucien Bebchuk of Harvard University, a well-known luminary in governance and executive compensation, will serve as the editor for the CGN. And, subscribing to the email newsletters for all 21 subject matter areas will cost a grand total of $40/year after the start-up phase, worth the money.

Read one of SSRN's Top Ten downloads on shareholder activism. The Role of the Board in Turbulent Times: Avoiding Shareholder Activism. (A collaboration between Hedge Fund Solutions and The Conference Board, Inc.)

Mike Levin is with Hedge Fund Solutions. Mike is an expert on issues relating to shareholder activism, corporate governance and risk management.

Monday, May 11, 2009

Target's Questions for Pershing Square



MINNEAPOLIS, May 11, 2009 -- Target Corporation (NYSE:TGT) has suggested some questions that those attending today’s Pershing Square town hall may want to ask. Target shareholders deserve clear, straightforward answers to the following questions:

  • Pershing Square began pushing its risky REIT proposal in May 2008, including hosting town halls on October 29 and November 19, 2008. On November 21, 2008 the Target Board announced its decision not to pursue Pershing Square’s risky real estate proposal. Following this announcement, at a meeting on February 12, 2009, Bill Ackman continued to press Target to implement his proposal and stated that he believed he needed to join the Target Board to be able to effectively express his point of view. About one month later, Pershing Square launched its proxy contest in an attempt to get onto the Target Board. During the 20 months of discussions prior to the proxy contest with Target, Pershing Square never criticized Target’s Board or management. Why should Target shareholders believe that this proxy fight is about anything other than Pershing Square’s REIT proposal?
  • The highly leveraged and concentrated nature of Pershing Square’s investment strategy for its Pershing Square IV fund has led to huge losses for its investors. Pershing Square’s proposals for Target have involved adding substantial leverage. Does Pershing Square still think it is appropriate for a fiduciary of Target to advocate taking leverage to risky levels?
  • Pershing Square’s first proposal to Target on August 2, 2007, was for the Company to repurchase $15 billion in stock, which would have required billions of dollars in incremental borrowings. We believe this would have meaningfully degraded Target’s credit rating and significantly impaired its ability to raise capital. With the benefit of hindsight, does Pershing Square agree that its proposed course of action would have been financially irresponsible for Target?
  • Has Bill Ackman discussed with his corporate governance expert, Professor Ronald Gilson, Jim Donald’s plan to abandon Rite Aid’s Board after only one year if Mr. Donald is successful in getting onto Target’s Board? What does that say about Jim Donald’s and Bill Ackman’s commitment to shareholders and good corporate governance? In addition, we are curious why Jim Donald’s willingness to drop from the Rite Aid Board, if elected to Target’s Board, was not included in Pershing Square’s bio of Jim Donald in the RiskMetrics Group presentation.
  • We believe both Target and Wal-Mart are great retailers, each of which has created a lot of value for its shareholders. The Target stock has outperformed Wal-Mart over a 10 year period, a 5 year period, and in 2009 to date. We note that Pershing Square has “cherry picked” time periods in order to claim that Target has underperformed. Isn’t it obvious that Pershing Square has done this in order to try to put Target in the worst light possible?
  • The share price of Borders Group, Inc. has declined by 73% since one of Pershing Square's partners was appointed to the board on January 17, 2008. Is this the reason Borders was not included in the list of Pershing Square investments in the Pershing Square definitive proxy statement?
  • Target’s 2006, 2007 and 2008 Annual Meetings were held in fully constructed, soon to be opened stores. Does Pershing Square truly believe that the Waukesha, WI store will not be in the same great condition for Target’s 2009 Annual Meeting? And does Pershing Square really think that Waukesha, a Milwaukee suburb, does not have internet or cell phone service that Pershing Square can access?

Catalyst Investment Research for Chemed Corp. (CHE)

Click here to download a complimentary copy of Hedge Fund Solutions' Catalyst Investment Research report for Chemed Corp. (Ticker: CHE). This professional grade research is dedicated to uncovering undervalued publicly traded companies that could have the potential to generate outsized returns due to an activist investors involvement.

Annual subscriptions are now available (a minimum of 24 research reports per year). Email: if you are interested in subscription information. Click here to download a fact sheet about the research.

Hedge Fund Solutions, LLC is not an investment, legal, or tax advisor, and none of the information available through the Firm is intended to provide tax, legal or investment advice.

Thursday, May 7, 2009

Pershing's Town Hall Meeting for Target

Pershing Square Capital will host a town hall meeting on May 11, 2009 for anyone interested in meeting Pershing's director nominees for the Target board of directors.

The meeting will take place at 11:00EST at the AXA Equitable Auditorium at 787 Seventh Avenue (between 51st and 52nd Streets) New York, NY.

Attendees can register at Those unable to attend will also be able to listen to the webcast here.

Monday, May 4, 2009

Video Clip of Today's AMLN Trial

Here is a video clip of this morning's Amylin proceedings.

In this clip Professor Michael Roberts from the Wharton School at the University of Pennsylvania is asked by the
Plaintiff's lawyer to define poison puts and the use of them as anti-takeover mechanisms.

To view a live and on demand video webcast of the two-day trial go to CVN's website.

Sunday, May 3, 2009

Compensation Proposals in 2009 Proxy Season

With the hammering that many stocks took last fall, and the intensifying scrutiny and criticism of executive pay in financial services and other industries, it’s probably not surprising that the number of compensation-related shareholder proposals appears to be up this proxy season.

Executive compensation consultants Towers Perrin suggest in a new paper that while it’s far too soon to predict the outcome of this season’s voting, early votes suggest that these proposals may garner as much, if not greater, support in today’s contentious shareholder environment than in past years. How companies respond to this year’s voting also remains to be seen, although it’s likely that many boards will be paying even closer attention to shareholder views than in the recent past as a result of changes in several RiskMetrics Group (RMG) policies related to executive pay.

Posted by Edward Ferris, a Partner with Hedge Fund Solutions, LLC. Edward is an expert on shareholder activism and , in particular, it's impact on organizational dynamics.

Friday, May 1, 2009

Live Coverage of Amylin Poison Put Dispute with Dissident Investors

Courtroom View Network (CVN) will provide a live and on demand video webcast of the Police Fund v. Bradbury (Amylin) trial beginning Monday, May 4 in the Delaware Court of Chancery.

At issue in the 2-day trial is the
validity of a "poison put" takeover defense that would protect Amylin's board of directors from being replaced. Carl Icahn, who owns 9.4% of Amylin, and Eastbourne Capital, which owns 12% of Amylin, are each attempting to replace five directors on the twelve person board.

The "poison put" provision adopted by Amylin's board allows bondholders to seek repayment of hundreds of millions of dollars if a majority of the board is replaced.

The named parties are a pension fund that owns stock in Amylin and Amylin CEO Daniel Bradbury. Carl Icahn has also requested to join the lawsuit as an individual plaintiff.

Click here to read a summary of this situation from Hedge Fund Solutions' weekly research report on activist investing.

Click here to read a Bloomberg article.

Click here to subscribe to CVN.

Sen. Schumer's "Dear Colleague" Letter Re: Shareholder Bill of Rights Act of 2009

Senator Charles E. Schumer (D-NY) circulated a "Dear Colleague" letter in the Senate this week, requesting fellow Senators support his Shareholder Bill of Rights Act of 2009.

The Act will:

  • Require public corporations to hold an annual advisory vote on executive compensation policies, and require shareholder approval for executive "golden parachutes."
  • Confirm the SEC's authority to grant shareholders access to the corporate proxy for nominations to the board of directors.
  • Require corporate directors to be subject to annual shareholder votes, and to receive a majority of votes cast by shareholders in order to remain on the board.
  • Require publicly listed corporations to separate the duties of Chief Executive and Chairman of the Board, so that boards can be assured of independent leadership.
  • Require the boards of publicly listed corporations to create a separate risk committee in order to ensure that risk management is given appropriate oversight.
Click here to download Senator Schumer's letter.

Posted by Damien Park, President & CEO Hedge Fund Solutions