Regular readers of our blog may remember Sizeler Property Investors, Inc. (NYSE:SIZ), which we covered back on September 7th, when the company received a letter from Opportunity Investors questioning why they weren't reviewing competitive bids. Well, Sizeler announced yesterday in an 8K filing with the SEC yesterday that it finally would consider the rival bid from Compson.

The company also revealed more details about the bid: It turns out that the bid is structured as an asset purchase, rather than a bid for the company as a whole. This means that the $16.10 per share would be paid for the real estate holdings of Sizeler; however, other company assets and liabilities would remain. The company said that the actual value to shareholders would be less than $16.10 per share; however, they are still currently working to review the bid.

Interestingly, about 10 minutes later, Revenue Properties Co. (with whom the company has the merger agreement at $15.50 per share) filed a 13D/A pointing out the flaws in the Compson bid:

"Among other relevant aspects of the Proposal, we would note the following: (1) the Proposal is non-binding and subject to negotiation of definitive documentation, (2) the Proposal relates to a purchase of assets only (and not a purchase of the public entity) and, as such, (i) Sizeler (and indirectly its stockholders) would continue to be responsible for significant wind-up costs, (ii) the actual receipt of consideration by Sizeler's stockholders would necessarily be subject to increased risk and delay, and (iii) Sizeler's stockholders would, we understand, be liable as transferees under State law for any liabilities of Sizeler that are not assumed or paid off by the purchaser under the Proposal, (3) while the Proposal refers to debt financing, a commitment letter was not included with the Proposal, (4) the Proposal appears to suggest that only $20 million of equity would be available for the transaction, (5) the Proposal calls for a break-up fee of $12 million, (6) the Proposal includes additional closing conditions relating to asset conveyances and estoppel certificates, and (7) while the Proposal does not seem to contemplate a "diligence out" in the definitive documentation, there appears to be an information review process
built into the Proposal."

The final valuation on the deal have yet to be determined by the company's analysts; however, the door is still open for a more competitive bid from either side. It is possible that Opportunity Investors and other majority holders may also want to review the proposal before siding with either offer. Currently investors are remaining prudent with shares sitting around $15.34 - up 2% since our first mention of the stock.

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We posted Goldman Sachs Group, Inc. (NYSE:GS) earnings announcement on September 12th, which was released a few days before other companies in its industry (investment banking/brokerage). Days later, most of the other brokerages that announced similar results that caused their stocks to move up on the news. Despite how obvious this concept may seem, many investors do not realize this correlation between companies within the same industry. Note the chart below, which illustrates Goldman Sachs (GS), Morgan Stanley (MS), and Lehman Brothers (LEH) - the three major players in the investment banking/brokerage industry:

Notice the strong correlation between the three companies - especially the jumps in price after the earnings announcements. Depending on the market, many large companies announce earnings similar to their peers. Therefore, if an early-reporting company beats analysts with strong earnings, it is worth the time to check out other companies in the industry. This is especially true if the operating results note a strong "macro environment" helping their growth as opposed to internal changes.

You can find companies in the same industry by visiting Google Finance, and you can find their 8k and 10k filings at SECFilings.

Lone Star Steakhouse & Saloon Inc. (NDAQ:STAR) recently passed the U.S. antitrust milestone, but may face another roadblock after new information surfaced today that may put its proposed buyout at risk. In a 13D filing with the SEC, the company disclosed that Deutsche Bank had upped its stake to 9.8%. Moreover, the bank noted in its filing that it "decide to vote against the transactions contemplated by the Merger Agreement and may seek appraisal of the fair value of its shares". This filing comes shortly after activist hedge fund Barington Capital noted (in its 13D filing) that "based on its analysis to date, it believes that the transaction consideration fails to provide adequate value to the Company’s stockholders". Barington also notes (in an attached press release) that their opinion is also shared by other experts:

"The transaction, which is subject to stockholder approval, would only provide stockholders with a 15% premium to the closing price of Lone Star's stock on August 17, 2006, the day before the deal was announced. Barington notes that Lone Star's stock has traded higher than the transaction price less than three months prior to the date the deal was announced. Barington also notes that CL King & Associates' analyst Michael Gallo has reported that the $27.10 share price looks low in their view and that Oppenheimer & Co. analyst Michael Smith currently rates Lone Star a buy with a 12-month price target of $32 a share. Based on Barington's evaluation of the transaction thus far, Barington does not believe that the consideration adequately reflects the value of the Company's extensive real estate holdings and upscale Sullivan's and Del Frisco's restaurant brands."

Combined, these two shareholders own 19.2% of the company's outstanding shares. With so much uncertainty surrounding the situation, the company may face a tough proxy vote in the fourth quarter of this year (to be announced before Oct. 15th). Meanwhile, the CEO of the company revealed in an August 28th filing that his stock and options would enable him to make roughly $80 million after the transaction. With 1,178,639 options at $12.41 per share, the CEO has a strong interest in making this transaction go through. If the merger fails, the CEO's risk-free options money will have to be exercised - costing him over $14 million while taking the additional risk of the company underperforming in the future. Whether or not the vote goes through remains to be seen, but with the stock currently trading above the buyout price, some investors are banking that new bidders will surface or the company will be saved by Barington and company. This stock is definitely worth keeping on the radar as this situation unfolds.

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Zunicom, Inc. (OTCBB:ZNCM) announced on September 12th that it would be spinning off its wholly owned subsidiary, Universal Power Group. The new supply chain logistics company would trade on the Amex with the symbol UPG. In UPG's S-1 statement with the SEC, they elaborate on their company:

"We are (i) a third-party logistics company specializing in supply chain management and value-added services and (ii) a leading supplier and distributor of portable power supply products, such as batteries, security system components and related products and accessories ... These services enable our customers to operate more efficiently and enhance their business by providing them with cost savings through effective sourcing, reducing inventory maintenance levels and streamlining distribution and order fulfillment. In addition, we also source and distribute batteries and portable power products under various manufacturers’ and private labels, as well as under our own proprietary brands, UPG™, Adventure Power®, UB Scootin®, Batteries & Beyond™, Charge N’ Start™ and UNILOK™. We believe that we have one of the largest inventories of batteries in the United States and are one of the leading domestic distributors of sealed, or “maintenance-free,” lead-acid batteries.

Our customers include original equipment manufacturers (“OEMs”), distributors and retailers, both on-line and traditional. The products we manage and distribute are used in a diverse and growing range of industries, including automotive, marine, recreational vehicles, medical devices and instrumentation, consumer goods, electronics and appliances, marine and medical applications, computer and computer-related products, office and home office equipment, security and surveillance equipment, and telecommunications equipment and other portable communication devices. Our largest customer is Brink’s Home Security (“Brinks”), one of the largest installers of security systems in the United States.

In each of the last nine years we have achieved double digit growth in net sales. Over that nine-year period, our compound annual growth rate in net sales was 32.86%. Similarly, our income before taxes has grown in four of the last five years. Over that five-year period, our compound annual growth rate in income before taxes was 18.26%. For 2005, our net sales were $81.3 million, and our income before taxes was $1.9 million. For the six months ended June 30, 2006, our net sales were $44.2 million, and our income before taxes was $1.2 million."

Unlike most spinoffs, this company has a long operating history (having first organized in 1968) - this removes one of the key risks associated with spinoffs. However, this stock does have one big risk - Brinks Security accounts for nearly 50% of their business. Although they have been lowering this number during the past few years, the loss of Brinks would be a significant hit to the company's earnings. The contract with Brinks is up for renewal in May 2007.

So, will this new stock be a buy? Well, spinoffs generally outperform the market because of one key factor that often makes them undervalued... When parent companies launch a spinoff, shares of the spinoff are distributed to parent company shareholders. Often times these shares are unwanted and immediately sold. This creates a windfall that artificially deflates the stock's price (since there was no change in fundamentals). This makes UPG a stock worth watching as it gets closer to spinning off.

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Nabi Biopharmaceuticals (NDAQ:NABI) is under increasing pressure to expand its contract with Bank of America to include a possible sale of the company. Third Point, an activist hedge fund and majority holder of the company, sent their demands to management today in a 13D/A filing with the SEC. The meeting to decide if this new course of action should be implemented is due to take place on September 15th.

To understand why there is a problem with NABI, we must first look at the past. In their lengthy letter attached to the 13D filing, Third Point elaborated on their history with the company:

"When we first became Ligand shareholders last year our thesis was similar to that driving our Nabi investment: Ligand was an asset-rich company with value substantially above what Wall Street was giving it credit for, but the value of its assets was obscured by poor management and imprudent capital allocation decisions. When we concluded that it was highly unlikely that these values would ever be realized under existing management and Ligand's business plan, and that there was indeed a substantial risk that continued cash burn might eventually force management to sell off the company's valuable assets at fire sale prices, we demanded that Ligand immediately initiate a process to maximize shareholder value. The result is striking: the stock is up by 30% since we became involved; just last week Ligand announced the sales of its two commercial operations at extremely attractive prices; and the company has never been in a stronger financial position, nor had a more exciting future. Due to our direct and substantial involvement in the value maximization process, significant cash should be returned to Ligand's shareholders shortly, and the prospects for the "new" company's remaining R&D pipeline and partnered products is tremendously exciting."

The hedge fund also noted how unresponsive and evasive CEO Tom McLain was in dealing with shareholders. In particular, Third Point had difficulty obtaining access to the company's books needed to complete a valuation of NABI to determine the best course of action. However, the fund noted that they "will not be deterred by the Company's attempts to ignore its shareholders and hide behind legal facades". At the end of the letter, Third Point summed up its argument:

"In sum, it is irrefutable that a majority of your shareholders vehemently oppose the long-term, highly-risky strategic plan that you continue to force upon us against our collective will (while, once again, you undertake very little risk yourselves due to your negligible outright holdings in the stock). You have had six months now to do your research and come to the only accurate conclusion - i.e., if you truly take your fiduciary, legal and moral obligations seriously you will agree to act upon the will of the majority of Nabi shareholders (many of whom have apparently now communicated with you directly) and empower BofA to explore all possibilities to maximize the significant asset values embedded within Nabi. As Mr. McLain has explained to us himself, it is very difficult for a small biotechnology company to succeed in the marketplace today. We agree, and when that company is not strongly capitalized and extremely well managed - Nabi being neither of these - it is nearly impossible. It is time that you finally acknowledge this and, should this prove to be the optimal outcome, place our valuable assets, at a substantial premium, in the hands of stronger operators."

If this proposal goes through, then there is a chance the company could be put up for sale at a substancial premium to its current market price. This makes it a stock definitely worth watching!

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Adams Express Company (NYSE:ADX) took some heat today from shareholders after the release of its proxy filing on September 6th. Karpus Management filed a 13D with the company containing a letter to the Board, which read:

"We have read your recently released preliminary proxy materials and are writing to you to express our dissatisfaction with the inherent shareholder disregard expressed in the materials.

In fact, while reading the preliminary materials, we found many instances where the proposed changes are argued to benefit the company's discretion in the long-run but find absolutely no compelling reason why it would be in shareholders' best interests to relinquish the key accountability measures listed in the proxy materials.

What's more, we can find no indication why it is that the Board is calling this special meeting altogether because in our belief it would have been more efficient and cost effective to have shareholders vote on these issues at the same time that they voted on the routine annual meeting matters back in March.

As an agent of the shareholders, the Board should be reminded that it is afforded the task of monitoring the activities of a Company's officers and/or managers and the overall performance of a Company so that it can enhance shareholder value. Given the circumstances before us, the Board appears to be failing in this task and also seems to forget about its duties to shareholders altogether."

The company is seeking to ammend its company charter in two ways:

• By requiring a larger 2/3 vote in order to convert the company from a closed-end mutual fund to an open-end fund. The difference is that closed-end funds are valued based on the demand for shares of their investment fund while open-end funds are valued based upon the NAV (net asset value) of the stocks that they hold. So, why is there anger over this by shareholders? Well, typically closed-end funds trade at a discount to their NAV (for a variety of reasons), so any conversion to an open-end structure would unlock this value for shareholders.
• By removing the rights of shareholders to ammend the company bylaws. Although the company notes that this technique has never been used on Adams Express, and is only used on rare occasions in the general market (when these provisions exist), it is a tool that activist shareholders could use to advance their own goals.
  

Clearly, it appears as if the company is worried about activist shareholders coming in and converting the fund from a close-end fund to an open-end fund to unlock shareholder value. This stock is worth keeping an eye on because if these provisions do not pass, that opens the door to potential activist shareholders to come in and try to unlock the stock's NAV value.

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Stratos International (NDAQ:STLW) announced today in a press release that the company would be exploring strategic alternatives, which could include a possible sale of the company. The company also said that it had retained CBIC World Markets Corp as its exclusive advisor. The story becomes interesting when we see that activist hedge fund Steel Partners is a majority holder, holding almost 15% of the company.

The company noted in its press release that:

"Steel Partners II, which issued a press release in June indicating that Steel Partners might be willing under some circumstances to make an offer for Stratos, would be welcome to participate in the process."

So, what was this offer? Well, if we look back to their June 13D/A filing with the SEC, we can see the following:

"We believe we have exhausted all our efforts to privately discuss with the Board  of  Directors a value enhancing  transaction in any  meaningful way. Accordingly, Steel  Partners II, L.P. publicly sets forth its willingness to offer to acquire all of the common stock of Stratos it does not  already own, through one of its affiliates or other appropriate  acquisition entity by merger or otherwise, for $7.50 per share in cash (the "Transaction"). Our proposal is not subject to any financing  contingency. This  represents a  substantial  23% premium to the current market price of $6.09 per share. We believe this all-cash offer will provide shareholders immediate liquidity and an immediate opportunity to maximize their investment in the Company. We urge the Board to allow the Company's  shareholders to have the opportunity to decide whether to accept our proposal.

We propose that the Transaction be accomplished through a definitive tender offer/merger agreement. Our proposal is conditioned upon satisfactory completion of due diligence typical for a transaction of this type (our  familiarity  with the Company  should  enable us to complete  all  required  due  diligence on an expedited basis), obtaining all necessary consents and approvals,  waiver of any Company  anti-takeover  provisions  including the Company's  shareholder  rights plan, other customary conditions for a transaction of this type and size and the execution  of a  definitive  agreement.

If as a result of our due diligence we find  evidence of  additional  value inherent in the Company  based on operating  results or  otherwise,  we would be willing to upwardly adjust the offer price to reflect such additional  value. We invite the Board to share with us any  documentation  in the Board's  possession which it believes  reflects  additional  value in the shares that it believes is not already known to us."

The stock is up 10% on the news, now trading at $6.70 - which is still a substancial discount to Steel Partners' offer of at least $7.50 per share. With such a large existing stake in the company, the hedge fund would be acquiring the rest of the company for cheaper than any other potential bidders. Whether or not additional bidders will show up remains to be seen; however, from what we know now, STLW appears to be trading at a steep discount to Steel Parters' June offer, and may be a buying opportunity even at these levels. Either way, it's a great stock to keep an eye on as the process of finding strategic alternatives begins...

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Steel Partners II LP is one of the most well-known activist hedge funds in the market today ran by 40-year-old Warren G. Lichtenstein, founder and principal of the billion dollar hedge fund. Through the years, the fund has built a track record of success through hostile takeovers and proxy battles. Like most activist funds, Steel Partners is simply attempting to give shareholders the money and rights that they deserve by replacing inefficient management and streamlining processes/spending.

In rare talk with Business Week last year, Mr. Lichtenstein offered some insight into his funds purpose and goals. He first noted that he thinks of Steel Partners more as a partnership that hedges itself by "buying cheap" than a stereotypical hedge fund. That is, instead of dealing in trading securities, he prefers to deal in terms of the companies they represent. Steel Partners has typically focused on finding undervalued companies (typically due to bad management) and unlocking that value. This usually involves replacing the Board, firing the responsible persons, and then unlocking the company's potential. Mr. Lichtenstein also told Business Week that he offered something management couldn't: Discipline. He said that his fund is focused on empowering people and held them accountable for their actions - something that corporate management these days struggles with. Finally, he revealed that his future plans are to focus his energy on larger companies with billion dollar market caps, because he finds them less risky despite being "riddled with inefficiencies and excessive costs".

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We first featured IMAX Corporation (NDAQ:IMAX) here back on August 11th when the stock was halved after a string of bad news. Since then, the stock had dropped another dollar or so before settling down in the upper $4 range. However, interest was renewed in today's trading as CNBC's Thomas Ko revealed that he added the stock to his portfolio, citing a potential buyout. Ko made the argument that the stock was at $10 when they were unable to find a buyer in the Board's range (most likely around $15), now it is much more attractive. Currently, the stock is trading in the $5 range - a 50%+ discount from its high a month earlier. Ko believes that many companies, potentially including Walt Disney Co. (NYSE:DIS) and Sony Corp. (NYSE:SNE), might be interested in the company in the $7 area. At this point, a buyout between $7 and $9 would be difficult for the Board to turn down, given the recent SEC investigations and other issues plaguing the company. Moreover, if the Board expressed interest in a sale before this entire ordeal happened, it is perhaps more likely that they would consider any opportunities in their situation now.

This speculation caused the stock price to surge 10% to settle at $5.27 on the day. It is likely that day traders will now be involved in the stock, and may cause significant near-term volatility. Also remember, a buyout is still nothing more than a rumor. However, the company remains cheap at its current levels and we know the Board was (and perhaps still is) interested in a sale of the company. These factors justify at least keeping an eye on the company throughout the next few months as things get clearer.

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Weatherford International Ltd. (NYSE:WFT) revealed today in a Form 4 filing with the SEC that director Robert Moses purchased 53,544 shares on Monday at prices ranging from $39.88 - $39.99. This $2 million purchase follows a rush of other smaller puchases by company officers and directors on September 1st. Weatherford provides equipment and services used for the drilling, completion, and production of oil and natural gas wells in the U.S. Some are speculating that this move relates to the company's earlier announcement of a successful installation of their "Life of Well" system. In that announcement, the company gave an overview of the system:

"Weatherford's Life of Well(TM) optical in-well system is providing both continuous seismic and pressure/temperature monitoring data and is also interfaced to the existing permanent ocean bottom cable system. This allows for the simultaneous collection of permanent seabed and downhole seismic data representing a significant milestone for the industry."

Although a report issued yesterday argued that value investors should wait to invest in oil services companies, investors applauded the insider buying as the price rose 5.45% in mid-day trading today.

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