Catalyst Investment Research for CTO - Complimentary Copy

Hedge Fund Solutions recently launched an investment research product dedicated to uncovering undervalued publicly traded companies that could have the potential to generate outsized returns due to an activist investor's involvement.

Click here to download a complimentary copy of the Catalyst Investment Research for Consolidated Tomoka Land Co. (Ticker: (CTO).

Download HFS's previous analysis for TIER and AVGN.

Annual subscriptions are now available (a minimum of 24 research reports per year).
Email research@hedgerelations.com if you are interested in subscription information.

Posted by Damien Park, President Hedge Fund Solutions and Jon Heller Cheap Stocks: Below Net Current Asset Value, Real Estate and other Value Strategies

Dissidents Avoid Forming a "Group" and Triggering Poison Pill

In a move that continues to shift the balance of power in proxy contests away from the Corporation and toward dissident investors, the SEC agreed this week to allow two activist investors to "round out" a slate of director nominees by permitting them to (1) solicit votes for their own nominees, (2) vote for nominees of an unrelated dissident, (3) vote for the nominees in management's proxy statement.

The SEC's action will undoubtedly have far-reaching implications for corporations concerned with activist investors.

Amylin Pharmaceuticals - Case in Point

Two dissident shareholders - Carl Icahn and Eastbourne Capital Management (ECM), who have each nominated a short slate of five director nominees for election to Amylin's (AMLN) twelve person board at the next annual meeting may state their intention to vote for each other's nominees. Without this approval from the SEC, the two dissident investors would have to change their filing status with the SEC to reflect that they are acting as a "Group". By doing so, the two shareholders would have to combine their ownership positions (Icahn owns 8.3% and Eastbourne owns 12.5%) which would have breached the threshold on AMLN's poison pill - which is set at 15%.

In a Client Alert about this matter issued on April 2 by the law firm Schulte Roth & Zabel (Mark Weingarten from SRZ is one of our regular contributing experts on activism) the authors conclude:

"The Commission Staff's grant of relief to ECM and the Icahn Funds will further enable soliciting stockholders who are seeking to elect a short slate to "round out" their slate with candidates from the full selection of nominees, even those proposed by another dissident. This new interpretation will allow activists to pursue their goal of achieving better shareholder representation, will allow shareholders to vote for the directors of their choice, and will keep management slates from gaining an advantage when there are multiple dissident slates nominated by unrelated shareholders. Going forward, this scenario may become more common in the activist community..."

To read SRZ's entire Client Alert click here.
To read a Client Alert issued by Gibson Dunn & Crutcher click here.
(Eduardo Galladro from Gibson Dunn is one of our Blog & Tacklers)

Posted by Damien Park, President Hedge Fund Solutions

Policy Makers Will Make Activist's Job Easier

An article in last week’s Wall Street Journal titled, Policy Makers Work to Give Shareholders More Boardroom Clout talks about federal and state policy makers advancing plans to give shareholders more power in corporate boardrooms.

The SEC, Congress and legislators in Delaware are all working on ways to make it easier for shareholders to choose directors.

Here are some important highlights from the article:

• The SEC is likely to push forward a proxy access rule by mid-May that will make it easier for shareholders to nominate directors on corporate ballots. As a result, shareholder activists who satisfies the SEC requirements (likely to be linked to the value and length of ownership) will not have to spend their own money soliciting shareholder votes for the election of their director nominees.
• Congressman Barney Frank is expected to submit legislation to give shareholders an advisory vote on executive pay.
• The Delaware Senate is expected to pass legislation that would change the state's corporate laws, permitting company bylaws to (i) require that a company include shareholder nominees in its proxy statement, and (ii) that a company reimburse shareholders for the expense of running proxy contests. The law could take effect as soon as August.

Posted by Damien Park, President Hedge Fund Solutions

Catalyst Investment Research for AVGN - Complimentary Copy

Hedge Fund Solutions recently announced the launch of a new investment research product dedicated to uncovering undervalued publicly traded companies that could have the potential to generate outsized returns due to an activist investor's involvement.

Download a complimentary copy of the recently published Catalyst Investment Research(TM) analysis for Avigen, Inc. (Ticker: AVGN).

This research identifies companies where activist investors have taken sizable investment positions and are pressing management to unlock value.


For additional information about subscribing to receive a minimum of two research reports monthly, email research@hedgerelations.com.

Posted by Damien Park, President & CEO Hedge fund Solutions LLC

SRZ Issues Winter 2009 Activist Investing Developments

Schulte Roth & Zabel recently issued the winter edition of their activist investing newsletter.
Topics covered in this issue include:

Second Generation of Advance Notification Bylaws (review this topic)
Many companies, at the urging of counsel “defending” against activist investors, have adopted new forms of ANBs, or Second Generation ANBs, that demand far more extensive disclosure from, and in some cases purport to establish eligibility qualifications for, proponent shareholders. These ANBs have been expanded to include not only longer advance notice requirements, but also requirements for the completion of company-drafted director nominee questionnaires, submission of broad undertakings by nominees to comply with company “policies,” minimum size and/or duration of holding requirements, continuous disclosure of derivative positions, disclosure of otherwise confidential compensation information, and even information regarding shareholders with whom the proponent has merely had conversations regarding the company.

Proxy Contest Settlement Agreements: An Overview (review this topic)
Although intense proxy contests are what attract attention in activist situations, most potential contests are resolved in advance of a fight through settlement agreements. Settling a potential contest allows both the activist investor and the company to avoid significant drains on their resources—both time and money—while at the same time providing additional mutual benefits.

Swaps and Section 16: Reporting and Liability Issues (review this topic)
Total return, cash-settled equity swaps, or “TRSs,” have been used by activist investors to build their economic exposure in target companies in addition to, or in lieu of, taking a direct ownership stake in the target. The use of these derivatives can give rise to complex issues for activists who find themselves subject to Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Where the potential for becoming a Section 16 insider exists, investors should understand how their TRS positions and the complexity of these instruments can impact their reporting obligations under Section 16(a), along with their potential for Section 16(b) profit disgorgement liability, lest they stumble into reporting delinquencies and/or liability exposure.

Click here to download the entire Publication.

Marc Weingarten, a Partner with SRZ and an expert on activist investing, is one of our Blog & Tacklers.

Takeover Preparedness and the New Hostile M&A Environment

Eduardo Gallardo and Matthew Walsh from Gibson, Dunn & Crutcher have issued a client memo which discusses the recent increase in hostile takeover activity and what companies should do about it.

Here are a few salient points from the article:

• Depressed stock prices coupled with companies flush with cash - particularly in the technology and pharmaceutical sectors - have made companies more vulnerable to hostile overtures.

• In 2008 there were 17 large-cap hostile takeover attempts of U.S. targets, compared to only 5 in 2007. As of the end of February 2009, hostile takeover accounted for over 38% of 2009 publicly announced M&A deals.

• Mid cap companies are not immune to unsolicited bids, which are coming from both strategic and financial players.

• At the same time that companies are facing an acceleration in hostile activity, activist investors have become a fixture of the corporate landscape.

• In the last few months, spin offs, share buyback programs and detailed proposals to improve operational efficiency and review business plans are among the alternatives to outright sales that have gained increasing favor among activists.

In light of these recent trends, public companies and their boards can take a number of practical steps to better prepare for, and respond to, a hostile bid or activists campaign.

These include:

1. Keep the Board Engaged and Informed.
2. Revisit the Company's Defensive Profile.
3. Explore Implementing an "On the Self" Shareholder Rights Plan
4. Review Advance Notice Bylaws
5. Know Your Shareholder Base
   

To read the entire client memo Click Here

Posted by Damien Park, Hedge Fund Solutions

Hedge Fund Solutions Launches New Activist Investing Research

Hedge Fund Solutions, LLC recently launched an investment research product dedicated to uncovering undervalued publicly traded companies that could have the potential to generate outsized returns due to an activist investor's involvement.

Download a complimentary copy of the recently published Catalyst Investment Research(TM) analysis for Tier Technologies Inc (Ticker: TIER).

This research identifies companies where activist investors have taken sizeable investment positions and are pressing management to unlock value.

In each case, the research will strive to provide readers with: (1) the activist's investment thesis and analysis, (2) the activist's track record for improving value in targeted companies, (3) the likelihood that the activist investor will achieve their goals in this circumstance, and (4) an in-depth analysis of the company's financial health irrespective of the activist's involvement.

For additional information about the subscription-based product email research@hedgerelations.com.

Posted by Damien Park, President & CEO Hedge fund Solutions LLC