Allegiant Travel Company (NDAQ:ALGT)
S-1 Filing by the Company
Allegiant Travel began trading this friday on the Nasdaq at $24.01 per share, above its initial range of $15 to $17 per share. Allegiant Travel is a leisure travel company focused on linking travelers in small cities to world-class leisure destinations such as Las Vegas, Nevada and Orlando, Florida. This stock is definitely one to watch as the U.S. IPO market has been on fire as of recent.

Catalina Marketing Corporation (NYSE:POS)
SEC Filings Watchlist
The company announced on Friday that they had hired Goldman Sachs to explore a possible sale of the company. Goldman Sachs will begin soliciting expressions of interest from interested third parties and present these offer to the board of directors to consider. The company had already attracted up to six private equity offers in the $30 range. The stock moved up over 15% on Friday to close just under $30 per share.

HEELYS, Inc. (NDAQ:HLYS)
S-1 Filing by the Company
HEELYS began trading Friday on the Nasdaq at $33.08, after pricing above its initial IPO range of $16 to $18. HEELYS is a designer, marketer and distributor of innovative, action sports-inspired products under the HEELYS brand targeted to the youth market. This stock is definitely one to watch as the U.S. IPO market continues to suprise to the upside.

Northwest Airlines Corp. (OTC:NWACQ) moved over 34% higher in today's trading on news that the company hired Evercore Group LLC for "strategic advice". We discussed a possibility of a merger in a previous article on this blog, where we noted that Owl Creek Asset Management - a 5% holder in the company - said that the company could be worth as much as $19.75-$33.50 per share in the event of a merger with Continental Airlines (NYSE:CAL). This estimate was based on the cost savings and other synergies that could benefit both companies, which Owl Creek explained in its 13D/A filing with the SEC. Meanwhile, Jon Ash, president of InterVistas-GA2, a Washington consulting firm said, "Northwest would be a good fit for Delta Air Lines Inc. or US Airways Group Inc. because they have complementary route systems". We first started watching this stock at $3.49 per share back on November 22nd and now the stock trades at $4.44 - this is still a great stock to keep an eye on as more information becomes available!

Related Companies
AMR Corporation (AMR)
UAL Corporation (UAUA)
Continental Airlines (CAL)

CNBC's Joe Kernen listed off his top takeover targets for the near-term today. The list included many names that have been thrown around recently, but he maintains that these are among the most likely takeover candidates:

• Micron Technology (NYSE:MU)
  
• RadioShack (NYSE:RSH)
  
• Deere & Co. (NYSE:DE)
  
• Ingersoll-Rand Co. Ltd. (NYSE:IR)
  
• OSI Pharmaceuticals Inc. (NDAQ:OSIP)
  
• Gap Inc. (NYSE:GPS)

There appears to be no signs of the merger mania slowing down anytime soon, as large cap companies continue to be eaten up in multi-billion dollar deals. This year has already become a record year for private equity acquisitions, topping $50 billion. Consequently, the stocks above are excellent potential targets to keep an eye on over the next few months.

Barclays Bank (NYSE:BCS) moved up over 4% early in today's session on comments made by Merrill Lynch suggesting the company may be a takeover target. The Merrill Lynch analyst said that Bank of America (NYSE:BAC) may be very interested in acquiring Barclays Bank, citing more international exposure in fixed-income, high yield, treasury management services, European credit card operations and other banking businesses. Bank of America has said in the past that its next step is to become a global leader in commercial and investment banking. Barclays is very well known internationally in these areas, particularly in corporate investment banking. If the merger went through, it would be the third largest of all time - a deal worth over $117 billion. According to the analyst, the deal would enable BoA to generate savings of up to $3 billion, enabling them to pay a 25% to 30% premium for the company. While there are no guarantees, many people are speculating that this deal could take place sooner than later. Barclays is definitely a stock worth keeping a close eye on.

Related Companies
Wachovia Corporation (WB)
Bank of Montreal (BMO)
Cass Information Systems (CASS)

Lone Star Steakhouse & Saloon, Inc. (NDAQ:STAR) revealed today in a schedule 13D/A filing with the SEC that they were able to obtain the confidentiality agreement they had been seeking in the past. They had been seeking this information in connection with their efforts to solicit additional bids for the company. The hedge fund, along with several other shareholders, have opposed the transaction ever since it was announced.

According to the filing:

"On December 5, 2006, Barington Capital Group, L.P. ("BCG") and the Company entered into a confidentiality agreement (the "Confidentiality Agreement") which will permit BCG and its financial advisor to obtain certain confidential or non-public information concerning the Company in order to evaluate its position with respect to the $27.35 per share consideration being offered to stockholders of the Company by affiliates of Lone Star Funds. The execution and delivery of the Confidentiality Agreement has been consented to by the affiliates of Lone Star Funds that are party to the merger agreement entered into with the Company." (Read More)

Barington noted in the past that they knew of at least five other potential buyers for the company who were interested in purchasing the company for more than the standing $27.10 offer. However, due to the company's reluctance to release financial information, they were unable to complete their due diligence. With this new confidentiality agreement in place, Barington may be able to provide this information to other potential bidders and perhaps solicit higher bids for the company. This makes STAR a stock worth watching closely as this situation unfolds.

Related Companies
Brinker International, Inc. (EAT)
Ryan's Restaurant Group (RYAN)
Texas Roadhouse Inc. (TXRH)

Finish Line, Inc. (NDAQ:FINL) is quickly finding itself under increasing pressure from shareholders who are questioning the board's longterm strategies to unlock shareholder value. Standing at the head of this group is the Clinton Group, a 4.4% holder of the company who is actively pushing for changes. The hedge fund filed a schedule 13D/A with the SEC today containing yet another letter to management:

"We are disappointed that you have not responded to us formally since our letter dated September 7, 2006 ("September 7th Letter"). However, we are appreciative of the constructive  dialogue that we have had with your management  team regarding the business and the progress of turning around performance. Since our letter was filed, we have received  numerous inbound telephone calls from both investment bankers, other institutional investors and private equity firms who share our views on The Finish Line, Inc. ("Finish Line" or the "Company").

We would like to reiterate  that we are  supportive  of you and your  management team as operators of the Company who are capable of guiding  Finish Line through the temporarily difficult environment. We note the commencement of a turnaround as illustrated in your press release of last week. However, we are beginning to question you and your board's  intentions  for  building long-term  shareholder value. We believe that being "very, very open minded" in  consideration  of the "long-term  best  interest of all the  shareholders,"(1)  should  entail an open dialogue with one of your largest shareholders and greater consideration of the proposals that we have detailed." (Read More)

Then the hedge fund goes on to outline some suggestions they have for improving the company's situation:

"We continue to believe that Finish Line's stock price is negatively affected by the dual class voting structure  (Class  A/Class B) for the  Company's common shares. We note that merely "having always had such a structure" is no longer meaningful in today's more shareholder friendly environment.

When we met in your offices in Indianapolis, we discussed capital allocation for the business. Given the strong balance sheet position of the Company, we think that the board  should  consider returning cash to the shareholders by significantly increasing the dividend.

In our September 7th Letter, we described the reasonableness of a modest senior debt financing to commence a Dutch tender offer to optimize the capital structure. We would be willing to discuss with you terms and conditions of a new credit facility which includes a $75 million undrawn revolving credit facility and a $100 million term loan B syndicated through the efforts of Clinton Group, Inc. (Clinton Group).

We believe this course of action is accretive to continuing  shareholders while (i) still allowing for a prudent capital structure; (ii) not limiting the growth plans of the management team and (iii) not detrimentally affecting the level of float." (Read More)

If the Clinton Group is able to solicit a response from management and get these changes implemented, it could mean significant share price appreciation over the long run along with an increased dividend. With many other shareholders and investment bankers expressing their support for the hedge fund, this becomes a strong possibility. This makes FINL a stock worth watching over the next few months.

Related Companies
Bakers Footwear Group, Inc. (BKRS)
Payless ShoeSource Inc. (PSS)
DSW, Inc. (DSW)

HEELYS, Inc. (NDAQ:HLYS)
S-1 Filing by the Company
Reports from Reuters indicated that the IPO for HEELYS would be priced at $21, above the expected range of $16-$18 per share. The stock is expected to open tomorrow on the Nasdaq under the symbol "HLYS."  HEELYS is a brand designer, marketer and distributor of innovative, action sports-inspired products, targeted to the youth market. The company's primary product is wheeled footwear.  In 2005, the company's net sales increased over 106% from 2004. By the end of September of this year, net sales increased 303% to $117 million.

Oxigene Inc. (NDAQ:OXGN)
Form 4 Filing by the Company
In a Form 4 filing with the SEC, Per-Olof Soderberg bought 100,000 shares on December 5th at $5.02, bringing his stake to 636,330. OXiGENE is an emerging pharmaceutical company developing small-molecule therapeutics to treat cancer and eye diseases.

Yahoo (NDAQ:YHOO)
SEC Filings Watchlist
Rumors suggest that Yahoo might be the potential buyer of the Metacafe website, to be sold for an estimated $200-$300 million. Metacafe is a video-sharing website that competes with Google Inc.'s (NDAQ:GOOG) recently purchased YouTube service.

Gap Inc. (NYSE:GPS) moved over 3% higher in today's trading session on news that the company's CEO may be replaced and renewed talks of a possible leveraged buyout of the company. The Gap's recent financial woes have caused unrest amongst shareholders and kept the stock relatively cheap throughout 2006. The company reduced its FY2006 profit forecast in November, citing momentum at Old Navy as the catalyst behind the Gap's slower-than-expected turnaround. It was around this time that the company's credit rating was moved to below investment grade after its fifth straight quarter of lackluster performance. Meanwhile, Pressler - the company's CEO - received a 100% year-over-year raise, bringing his salary to almost $17 million this year alone. However, the Gap noted that he was not awarded any bonuses due to his failure to reach financial objectives. It is not difficult to see why investors would applaud a new CEO, and combined with the possibility of a leveraged buyout, GPS is definitely a stock worth keeping an eye on.

Related Companies
The Wet Seal, Inc. (WTSLA)
American Eagle Outfitters (AEOS)
Fossil, Inc. (FOSL)

PACCAR Inc. (NDAQ:PCAR)
Announced a $300 million buyback program

Peoples Bancorp of North Carolina, Inc. (NDAQ:PEBK)
Announced a $2 million share buyback program

Rockwell Automation, Inc. (NYSE:ROK)
Raised buyback from 9 million to 12 million shares

Verizon Communications Inc. (NYSE:VZ)
Raised buyback from $1.5 billion to $1.7 billion

Friendly Ice Cream Corp. (AMEX:FRN) may soon find itself embroiled in a proxy battle as The Lion Fund vowed to solicit proxies at the company's next annual meeting in 2007 to institute two of its nominees onto the company's board of directors. The 14.92% holder has been engulfed in this battle with the board since August. Sardar Biglari, Managing Partner of The Lion Fund, also addressed shareholders in a letter attached to his 13D/A filing with the SEC yesterday. In this letter, he outlined the fund's frustrations with the company's performance and his intent to nominate new board members at the company's next annual meeting:

"The optimal avenue to achieve good corporate governance and to envision wise means to enhance long-term value is to place very significant shareholders on the board to ensure a proper alignment of interests between the board and the shareholders.

Our concerns over Friendly’s arise from its poor corporate governance, poor operational performance, poor stock performance, and its weak balance sheet. To illustrate, the company’s escalating legal costs directly result from poor judgment on corporate governance issues, which has led to extensive litigation. Good corporate governance contributes to good corporate health. If you are a long-term stockholder, you care about the health of the corporation, which cares about all of its constituencies — franchisees, employees, creditors, customers, and shareholders. Good corporate health will support long-term shareholder value creation, the ultimate objective of a company. Friendly’s must make better capital allocation decisions and improve its capital structure if it is going to survive and then thrive.

We seek alteration in the composition of the Board of Directors to provide greater presence of directors who are autonomous and who therefore are able to represent the best interests of all stockholders. As directors, Phil and I would be technically and psychologically independent.

Over the coming months we will be communicating with you regarding our ideas for Friendly’s. Our Web site, www.enhancefriendlys.com, will be the prime source of information that we will communicate to you on important matters. Our guideline is to tell you the facts that we would want to know if our roles were reversed. We are applying this principle in our communications with you now and will apply no lower standard when we serve as stewards of your capital in our role as board members. Shareholders are entitled to no lesser standards and consideration; all shareholders of Friendly’s should be treated equally. We encourage shareholders to visit our Web site regularly and to share their thoughts with us about Friendly’s." (Read More)

Although Friendly's stock has increased significantly so far this year, it can be partially attributed to the strong buying by The Lion Fund and other shareholders seeking changes in the company's direction. The company's relatively small float makes the share price vulnerable to this amount of buying or selling. If The Lion Fund is successful in obtaining board seats and implementing their solutions for the company, it could mean a justification for these prices and an even larger return in the long run. This makes FRN a great stock to keep an eye on into the 2007 shareholders meeting.

Related Companies
Denny's Corporation (DENN)
IHOP Corp. (IHP)
Yum! Brands, Inc. (YUM)