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Activist Hedge Funds Make Hay

Date: Friday, March 15, 2013
Author: Stephen Taub, Institutional Investor Alpha

Call it the Day of the Activist.

Paul Singer’s Elliott Management said it now owns 4.3 percent of energy company Hess. The hedge fund manager has created a website to take its case to investors in a newly created website. In a 71-page presentation posted online, Elliott argues that the intrinsic value of Hess is closer to $128 per share compared to its Wednesday closing price of $71.69. “Shareholders want accountability: history of withholding votes on directors, objecting to Say on Pay, and trying to destagger the board,” Elliott states in its presentation.

A lobbyist group has joined William Ackman in his campaign at nutrition supplements supplier Herbalife. On March 12, the National Consumers League sent a letter to Federal Trade Commission asking the agency to investigate Herbalife as a potential pyramid scheme. “NCL wants the federal agency to evaluate the evidence on both sides and make a determination that will serve as an important guide to consumers,” the 114 year-old organization said in a statement. Ackman, founder of Pershing Square Capital Management, wasted no time in disseminating the letter Wednesday. Ackman With investors the likes Carl Icahn and Third Point’s Daniel Loeb sitting on the opposite side, an FTC probe increasingly seems like Ackman’s best chance to produce a big gain on his negative bet. Shares of Herbalife Wednesday fell 3.62 percent, to close at $38.92.

Jeff Smith’s Starboard Value and Calgon Carbon have reached a settlement, following the activist hedge fund’s threat to launch a proxy fight. Under their deal, Calgon will nominate two directors unrelated to the company, including one of Starboard’s handpicked nominees, Louis Massimo, former executive vice president and COO of Arch Chemicals. Calgon also agreed to amend its shareholder rights agreement to raise the beneficial ownership trigger from 10 percent to 15 percent. The company also said that long-time director Robert Cruickshank will retire. Starboard, which owns 9.2 percent of the stock, has agreed to vote all its shares in favor of each of the board’s nominees at the May 1 annual meeting. Altogether, four director nominees will stand for election, which will expand the board by one seat, to nine directors. Calgon retained its staggered board policy.

A former FrontPoint Partners portfolio manager plans to start a new hedge fund firm devoted to Asian financial stocks. Thomas Monaco has launched Nighthawk Capital. He reportedly had worked with Steve Eisman on the FrontPoint Financial Services Fund.