Cost-U-Less, Inc. (NDAQ:CULS) announced yesterday that it entered into separate letter agreements with two activist hedge funds that have been pushing for changes. Delafield Hambrecht and Chadwick Capital Management reached an agreement with the company whereby the company would nominate and support John D. Delafield for election to the company's Board of Directors in 2007 and submit a proposal to remove the requirement that a business combination be approved by holders of at least 2/3 of the oustanding common stock under certain circumstances. Meanwhile, the two hedge funds agreed to support the slate of directors nominated by the company and not propose any other business or conduct a proxy solicitation at the 2007 annual shareholders meeting.

We first took note of this company back in December when Monarch Activist Partners suggested that the company put itself up for sale in a Schedule 13D/A filing with the SEC. About a month later Delafield Hambrecht issued a similar demand in their own Schedule 13D/A filing, reasoning that CULS is worth at least $12 per share. Delafield even hinted that they would be a potential bidder in the event of a sale, although admitted that a strategic buyer would likely be willing to pay more. Shortly thereafter, the company responded by saying that it had contacted several investment bankers and other advisors in order to help them explore strategic alternatives. Interestingly, the latest advisor that they hired happens to be Cascadia Capital - a Seattle-based investment bank with a nationally recognized M&A advisory practice. With a fresh new seat on the Board of Directors and less stringent business combination requirements, the odds of a sale taking place just greatly increased! This makes CULS a stock worth watching closely!

Related Companies
Costco Wholesale Corporation (COST)
PriceSmart, Inc. (PSMT)
Wal-Mart Stores, Inc. (WMT)