January's Activist Investments - 65 Companies Targeted

Below is a summary list of investments made by shareholder activists during January. This information was extracted from Hedge Fund Solutions' Catalyst Equity Research Report (TM), a free in-depth weekly research on activist investments.

Click Here to subscribe to the FREE report.

Ticker	Company	Activist Investor
ABVA	Alliance Bankshares Corp	John Edgemond
AMLN	Amylin Pharmaceuticals	Carl Icahn; Eastbourne Capital
AVGN	Avigen Inc.	Biotechnology Value Fund
BIOD	Biodel Inc	Moab Partners
BKS	Barnes & Noble, Inc	Yucaipa Companies
CHUX	O'Charley's Inc	Crescendo Partners
CITZ	CFS Bancorp	Financial Edge Fund
CLCT	Collectors Universe	Shamrock Activist Fund
CNBC	Center Bancorp	Lawrence Seidman
CPWM	Cost Plus Inc	Stephens Investment Holdings
CRGN	CuraGen Corp	DellaCamera Capital
CTO	Consolidated Tomoka Land Co	Wintergreen Advisers
CWLZ	Cowlitz Bancorporation	Crescent Capital
DFZ	R.G. Barry Corporation	Mill Road Capital
DITC	Ditech Networks	Lamassu Holdings
EDCI	EDCI Holdings	Chapman Capital
ENZN	Enzon Pharmaceuticals	DellaCamera Capital; Carl Icahn
EPL	Energy Partners	Wexford Capital
FNHM.OB	FNBH Bancorp	Andrew Parker
FSBI	Fidelity Bancorp	Finacial Edge Fund
FSCI	Fisher Communications	Gamco Investors
FSFG	First Savings Financial Group	Joseph Stilwell
GET	Gaylord Entertainment	TRT Holdings
ICGN	ICAgen Inc	Xmark Opportunity Partners
INFS	InFocus Corp	Nery Capital Partners
ISH	International Shipholding Corporation	Liberty Shipping Group
JTX	Jackson Hewitt Tax Service	Shamrock Activist Value Fund
KANA	Kana Software Inc	KVO Capital Management
KFS	Kingsway Financial Sevices	Joseph Stillwell
KONA	Kona Grill	Mill Road Capital
LAQ	The Latin America Equity Fund	City of London Investment Management
MGAM	Multimedia Games Inc	Dolphin Limited Partnership
MIPI	Molecular Insight Pharmaceuticals	David Barlow
NDD	Neuberger Berman Dividend Advantage	Western Investment
NTII	Neurobiological Technologies	Highland Capital Management
NTMD	Nitromed Inc	Deerfield Capital Management
OFIX	Orthofix	Ramius Capital
PIF	Insured Municipal Income Fund Inc	Bulldog Investors
PPCO	PenWest Pharmaceuticals	Perceptive Advisors; Tang Capital Partner
PRSC	Providence Service Corp	73114 Investments
PRXI	Premier Exhibitions, Inc	Sellers Capital
QDHC	Quadramed Corp	BlueLine Capital
RDC	Rowan Companies	Steel Partners
SLTC	Selectica Inc	Trilogy
SONS	Sonus Networks	Legatum Limited
SSE	Southern Connecticut Bancorp	Lawrence Seidman
SUAI	Specialty Underwriters Alliance	Hallmark Financial Services
SUG	Southern Union Co	Sandell Asset Management
SUMT	SumTotal Systems	Discovery Capital
SUTM.PK	Sun Times Media Group	Davidson Kempner Partners
TEC	Teton Energy Corp	First New York Securities
TESS	Tessco Technologies	Discovery Equity Partners
TIER	Tier Technologies Inc	Parthenon Capital
TMI	TM Entertainment & Media	Bulldog Investors
TRGL	Toreador Resources	Nanes Delorme Partners
TRMA	Trico Marine Services	Kistefos AS
TUTR	Plato Learning	Stephen Becker
TWMC	TransWorld Entertainment	Riley Investment Management
VLCY.PK	Voyager Learning Company	FoxHill Opportunity
WFMI	Whole Foods Market Inc	Yucaipa Companies
WMPN.OB	William Penn Bancorp	Joseph Stilwell
WOC	Wilshire Enterprises	Bulldog Investors
WRLS	Telular Corp	Simcoe Partners
YSI	U-Store-It Trust	Todd Amsdell
ZEP	Zep Inc.	Gamco

Aggressive Activists Usually Succeed

No one on the corporate side wants to get that confrontational call or letter from a hedge fund or investor demanding a change in management. But a paper by two New York University profs in the February 2009 Journal of Finance concludes shareholder activism works - for shareholders, that is.

The study draws upon 151 hedge fund activist campaigns from 2003 to 2005, plus a second data set of 154 activist efforts spearheaded by individuals, private equity funds, VCs or other asset management groups. All of the campaigns studied involve aggressive calls for change such as gaining seats on the board, replacing the CEO, stopping a merger or pursuing strategic alternatives. Symbolic or minor changes aren’t included.

The authors look at stock price movement around the activists’ declaration of intent in a 13D filing and in the year following, as well as the types of change demanded and achieved.

The results?

• Stocks of companies targeted by hedge fund activists earn a 10.2% abnormal return in the period around the filing of the 13D. Those facing other kinds of activists outperform by 5.1%.
• Superior returns persist in the one-year period following the 13D. Hedge fund campaigns deliver an average 11.4% abnormal return after a year, and other activists’ interventions result in 17.8% outperformance.
• When it comes to getting management to make the proposed changes, aggressive activists are more often successful than not. Hedge funds pushing a confrontational agenda win 60% of the time, and other investors achieve their objectives in 65% of the campaigns. Most commonly, they win board seats by threats of proxy contests.
• Hedge funds often target more financially healthy companies and often demand cash payouts or share repurchases. Other activists are more likely to focus on changing strategies or spending priorities.

The study doesn’t focus on defensive strategies for companies - just outcomes. Prevention may be the best defense. In a time of depressed equity prices, management and boards should be taking actions (without anyone demanding change) to bolster shareholder value … reducing costs, strengthening the balance sheet, making needed changes in leadership.

Investor relations professionals, I suspect, can help mostly by serving as a timely and outspoken voice to convey shareholder concerns up the line - before anyone declares war through a 13D. Now, more than ever, IR should be listening and providing a conduit to management and the board.

Posted by Dick Johnson, President Johnson Strategic Communications and the author of the investor relations blog IR Cafe.

Steel Seeks to Dismiss Icahn Suit

Steel Partners is seeking to dismiss a lawsuit filed against them by Carl Icahn. As previously noted on this blog, Icahn is suing Steel claiming the fund failed to properly inform investors before merging into WebFinancial, a publicly-traded company controlled by Steel.

According to a Reuters report, Steel's lawyers requested the dismissal "Because it is so obvious that plaintiff's claim boils down to nothing more than one for an award of $15 million in damages (at the absolute most), plaintiff's motion is so utterly without merit as to be frivolous and worthy of sanctions."

Click Here to view a copy of Steel's investor presentation detailing The WebFinancial Solution.

Pershing Square's Annual Investor Presentation

Pershing Square Capital hosted their annual investor dinner on January 22. Click here to download Pershing's 70 page investor presentation from the DealBreaker.com blog.

Icahn Issues an Open Letter to Other Investors in Steel Partners' Fund

OPEN LETTER TO INVESTORS
IN STEEL PARTNERS FUNDS

Carl C. Icahn
767 Fifth Avenue
New York, New York 10153

January 23, 2009

Dear Fellow Investors:

As you know, Steel Partners has announced the "WebFinancial
Solution" which we believe would be extremely detrimental to all of
our investments in Steel Partners. I am against that transaction and
a lawsuit has been filed to oppose it in Delaware.

I believe it will be beneficial for all investors in Steel Partners
to meet to discuss the "WebFinancial Solution." Because Steel Partners
has refused to make a list of investors available to us, we ask that you
call either Susan Gordon (212-702-4309) or Sue Zippo (212-702-4310) at
my office. Please provide them with your name and phone number. We
will then contact investors and arrange for a meeting.

Steel Partners' actions to date and plans for the future are
significant events for all of us and I strongly believe that we should
meet to share our thoughts and concerns.

I look forward to meeting all of you.

Very truly yours,

Carl C. Icahn

Activists Pounce on SPACs

Published on RealMoney.com

By Damien Park, President & CEO Hedge Fund Solutions, LLC

1/22/2009

Last year was tough for special purpose acquisition companies (SPACs), and 2009 is shaping up to be even more difficult.

These relatively obscure investment vehicles are usually formed by a group of managers with operating or investment experience who raise capital through an initial public offering (IPO). After the offering, a majority of the proceeds are held in an interest-bearing trust account until the consummation of a business combination with an operating company.

If the scheme works as intended, SPACs can generate above-market returns for investors by expeditiously moving an undervalued private company onto a major stock exchange. Shareholders get to participate in a reverse-merger IPO with tremendous upside potential and management is rewarded with a substantial ownership stake in the new entity.

Alternatively, if management fails to identify an acceptable acquisition candidate, usually within 24 months of the IPO, the entity must be liquidated and all of the cash held in trust is distributed back to shareholders. Since insiders do not participate in the liquidation distribution, management receives nothing.

As private companies find it harder to access capital from frozen credit markets, tapping into the equity marketplace through this reverse IPO process can be very appealing. However, depressed stock market valuations have squashed many of the incentives for a private company to "go public" any time soon.

During 2008, 21 SPACs were forced to liquidate because they ran out of time to complete a transaction. For the SPACs that found deals, the market was unforgiving, punishing shareholders an average of 60% from their IPO debut.

All of this doom and gloom is creating a steep discount between the stock price and the cash value at 47 SPACs with a combined $10.3 billion in acquisition capital. In 2009, 34 of these companies must find suitable acquisition candidates or face liquidation.

This has captured the attention of activist investors, who see an opportunity to generate high returns by forcing these companies to liquidate sooner rather than later.

One activist investor, Phillip Goldstein, who made his name busting open closed-end funds trading at a discount to their net asset value, raised a reported $100 million for a SPAC-only activist fund. Other activists are following his lead.

Well-informed investors recognize that every SPAC is trading at a discount to its cash value and, if liquidated, will generate a return on investment proportional to the discount.

If management proposes a deal before the liquidation date, a shareholder has two excellent options. If the transaction is clearly remarkable, the investor can approve the transaction by voting in favor of it. If not, he or she can vote against the transaction and redeem ownership for a pro rata share of the trust account. Either way, there is a high probability the discount-to-trust will close.

However, if 20% to 40% of the shareholders vote against the transaction and request their money back (this threshold depends on the company's bylaws), the deal is scuttled and the SPAC will likely liquidate within a couple months.

Activist investors have identified this as a chance to boost returns. Better than anyone, they know how to turn a company's governance rules, like supermajority vote approval for transactions, to their advantage. By gaining control of enough shares to block any acquisition and demanding early termination, activists leave management with very few options or than liquidating.

In a recent example, Goldstein picked up an 18.5% stake in TM Entertainment and demanded that it liquidate immediately. He needs support from just another 11.5% of shareholders to block a transaction, and he says there is virtually no chance that TMI can complete a business combination by Oct. 17, 2009, when a forced liquidation must occur. In an effort to hurry things along, Goldstein is trying to gain control of the board to prematurely liquidate the trust.

If liquidation takes place or a deal is successfully blocked by shareholders, TM's management must forfeit approximately $2.5 million of their personally invested capital in the SPAC along with the 20% ownership stake that they would obtain in the post-acquisition company. As a result, management is pleading with shareholders to vote against Goldstein's takeover attempt.

The magnitude of the losses to management might predict a fierce and costly fight. However, unlike operating corporations, SPACs can't fight back using corporate money.

According to their bylaws, SPACs' funds are limited to working capital, taxes and moderate salaries. Legal and proxy battles, therefore, must be paid out of pocket by management, creating an equal playing field with someone like Goldstein who has long opposed the use of shareholder money to fight dissidents like him.

It's hard to say which SPACs might be raided. All SPACs seeking acquisitions have significant exposure and limited firepower. For investors, even without an activist forcing liquidation, the value appreciation opportunity seems solid. But in 2009, we'll likely see many of these companies under considerable pressure to return their cash to investors sooner rather than later.

Special Purpose Acquisition Companies (SPACs)

(Source: Morgan Joseph SPAC Update)

SPAC	Ticker	Liquidation Date	Discount to Trust	Activist(s) in Shareholder Base
Alternative Asset Mgt.	AMV	08/02/09	4.2%	Yes
Atlas	AXG	01/26/10	8.0%	Yes
BPW	BPW	02/28/10	8.5%	No
Global Brands	GQN	12/08/09	7.4%	Yes
Golden Pond Healthcare	GPH	11/08/09	7.1%	Yes
Highlands	HIA	10/04/09	6.2%	No
MBF Healthcare	MBH	04/23/09	2.5%	No
Media & Entertainment	TVH	03/13/09	2.0%	Yes
NRDC Acquisition	NAQ	10/19/09	6.5%	No
NTR	NTQ	02/01/09	0.9%	No
Prospect	PAX	11/16/09	6.9%	No
Santa Monica Media	MEJ	03/29/09	2.4%	No
Sapphire Industrials	FYR	01/19/10	7.5%	No
SP Acquisition	DSP	10/12/09	7.0%	Yes
TM Entertainment	TMI	10/19/09	5.9%	Yes
Trian Acquisition I	TUX	01/24/10	7.8%	Yes
Triplecrown	TCW	10/25/09	7.0%	Yes
United Refining Energy	URX	12/12/09	6.9%	No
Victory	VRY	04/26/09	3.1%	Yes

Greenlight Capital's Investments in Europe

Revised since originally posted.

Activist investor David Einhorn talks with The Financial Times in July 2008 about his distressed debt investment strategy in Europe.

Click here to view the video.

Seperately, and more recently, Einhorn has disclosed he has raised his stake in Punch Taverns PLC (PUB), a UK-based pub management company, to over 8% again. Last year, his hedge fund, Greenlight Capital, owned about 12% of the Company before reducing their position to 7.4% just before the New Year.

PUB currently sells at 38.5p, which is down from 750p one year ago, representing a loss of 93% in value. Greenlight's cost basis is around 200p.

This is not Einhorn's first investment in Europe and will not be his last. In March, Greenlight opened an office in London to explore investment opportunites throughout Europe. In August, Einhorn began his first activist campaign by opposing a highly dilutive EUR 3.7bn rights issue at Natixis, a French investment bank. Ultimately Einhorn was unable to block the transaction. Natixis is currently down 83% on a 52-month basis.

Posted by Marko Grassmann in Europe.