Medtronics Inc. (NYSE:MDT) has found itself abound in rumors recently. The company told shareholders at last Thursday's annual meeting that the company was not for sale, despite rumors that Johnson & Johnson was preparing a bid. Medtronics CEO Art Collins insisted that the company had not been seeking a buyer; however, despite this rebuke, the possibility for a takeover bid still exists. The idea of a possible buyout came as a result of the company's sliding stock price, which dropped from $60/share earlier this year down to its current range in the $40s. The company attributed this drop to the industry-wide recall of cardioverter defibrillators along with reduced coverage of medical devices by government programs and lower ICD revenues. Typically, when companies experience such drops, they become vulnerable to buyout offers and even hostile takeover bids.

Interestingly, on August 28th three company directors purchased or acquired large blocks of shares at market close. These transactions included the acquisition of over 1,500 shares, an open market purchase of 1,000 shares, and a string of open market purchases totaling 25,000 shares. The transactions all occurred on August 24th - the day of the annual meeting. Are these insiders simply making regular purchases based on the notion that their company will perform well in the future, or do they know something? Although there is an absence of call options (which are the most telling indicator that mangement knows something that would affect the price in the short-term), the purchases do raise question especially since this is the first instance of open market purchasing (as opposed to acquisition) in several months. This is definitely a stock to keep an eye on...

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Bally Total Fitness (NYSE:BFT) recently announced, in an ammended 13D filing with the SEC, that they had signed a confidentiality agreement with activist hedge funds Liberation Investments and (earlier) Pardus Capital. According to the most recent filing:

"On August 28, 2006, a representative of LIGLLC executed a confidentiality agreement (a copy of which is attached hereto as Exhibit 99.34, the “Confidentiality Agreement”) with the Company pursuant to which the Company agreed to make available to LIGLLC and certain of its representatives on a confidential basis certain information (the “Evaluation Material”) of the Company, including, without limitation, information relating to the Company’s business, products, markets, condition (financial or other), operations, assets, liabilities, results of operations, cash flows and prospects."

So, why do they want this information?

"Following their review of the Evaluation Material, the Reporting Persons may determine to attempt to arrange or participate with third parties in an extraordinary corporate transaction with respect to the Company, such as an acquisition, a sale of all or substantially all of the Company’s assets, a reorganization, a recapitalization, or a significant debt or equity investment."

These hedge funds have a long history with Bally: Last year, the two hedge funds launched a proxy battle to gain control of the board - a battle eventually led to ousting of then-CEO Paul Toback and the appointment of two Pardus-supported board members. The company then made an unsuccessful attempt to put itself up for sale. Meanwhile, Bally's shares plummeted to under $3/share from a high of $9/share just a month earlier. This freefall was the product of poor operating results posted at the end of July along with the uncertainty surrouding the company's future.

Now, with these latest confidentiality agreements, the hedge funds will have more indepth access to the company's financial condition to either put it up for sale or begin a restructuring plan. Given the fact that Bally's stock is near a 52-week low right now, a possible buyout is the most likely of the two. If the hedge funds are successful, it could be a substancial gain; however, there is always the risk that the hedge funds will simply bail on the investment and cut their losses (like Pirate Capital did to OSI not long ago!). So far investors have applauded these announcements, bringing the stock up nearly 15% since the original announcements. Though this is purely speculative at the moment, it is a great stock to keep an eye on and perhaps play with longer-term options.

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Educate Inc. (NDAQ:EEEE) announced yesterday in an 8-K filing with the SEC that they had sold off their Education Station business segment in an $18 billion deal. The business segment, which helped public schools comply with the No Child Left Behind Act, was sold for $6 million with another $12 million being paid for software licensing and support. The business unit has long been a drag on the company's earnings despite increasing revenues. The stock moved up 11% in today's trading as investors applauded the move, which should help the company follow through with its turnaround plans that caused so much difficulty last quarter. The stock is currently being heavily traded by technical analysts; however, if the turnaround is successful, it may become a decent play for fundamental investors as well.

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