Griffon Corp. (NYSE:GFF) received some advice today from the Clinton Group who revealed a 5.2% in the company along with a series of recommendations to unlock shareholder value. The activist hedge fund said that the current stock price does not reflect the value of the company's operating subsidiaries, which is a notion that the company has also acknowledged. Consequently, the Clinton Group offered to help the company explore strategic alternatives, which include a potential tax-free spin-off of some or all of the companies subsidiaries or privatization of the company.

The hedge fund elaborated in a letter attached to their 13D filing:

"We greatly appreciate you and Mr. Edelstein taking the time to discuss with us Griffon Corporation  (Griffon or the Company) and its prospects, and we are pleased with management's willingness to listen to shareholder ideas and opinions. Currently, funds and accounts managed by Clinton Group Inc. (Clinton) beneficially  own in excess of 5% of the outstanding shares of the Company.

We have been impressed with the franchise that management has built, and continue to appreciate management's eye towards returning shareholder value through steady share repurchases. We have invested in Griffon because we believe the market price of Griffon shares fails to reflect the true value of the Company's operating subsidiaries, if they were to be valued on a stand-alone basis.

Given the apparent disconnect between each segment's intrinsic value and the Company's current stock price, we were pleased to hear on last quarter's conference call that management was proactively reviewing strategic alternatives with respect to the defense segment. We hope to work constructively with management to continue to evaluate multiple strategic alternatives, including, but not limited to, a tax-free spin-off or sale to strategic acquirors of one or more of Griffon's subsidiaries, or a going-private transaction for the Company. Given the market leading positions of Clopay Corporation's garage door division and  specialty films division, as well as Telephonics Corporation's well positioned and growing defense segment, we believe any of these initiatives, or a combination thereof, would unlock significant value for existing shareholders.

Based  on our due diligence, we firmly believe that competitors in each respective segment both hold the Company's subsidiaries in high regard and have tremendous strategic interest. Additionally, a publicly traded comparable company analysis as well as our due diligence supports the notion that ample demand would exist for Telephonics Corporation in the public market as a stand-alone company.

Our analysis ultimately suggests that fair value for Griffon's stock approximates $31-$35, prior to certain adjustments as footnoted below:

[Click Here to View Table in SEC Filing]

We enjoyed meeting with you and hope to continue an open and constructive dialogue. To that end, please feel free to call me at 212-377-4224 or Tobin Kim, Vice President, at 212-739-1830, anytime to discuss any and all issues further at your convenience." (Read More)

The Clinton Group's analysis (along with the company's own suspicions) is correct - the breakup value of the company is greater than the value currently reflected in the share price, based on industry valuations. With management already exploring ways to unlock this value and the Clinton Groups expertise in this area, there is good chance that this value could be unlocked in the near term. The company is currently trading at $25.66, after moving up over 6% today on the news. The valuation calculated by the Clinton Group suggests that the share price could reach $31 to $35, meaning a 20.6% to 36.2% premium over today's prices. While this process may take several months and there is no certain decision by the company's management, this stock is definitely one worth watching into 2007.

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Bill Ackman's Pershing Square disclosed an 11.3% stake in Ceridian Corporation (NYSE:CEN) today in a 13G filing with the SEC. The stock moved up more than 5% in early trading this morning on the news. Pershing Square is a well known hedge fund that tends to take an activist stance in the companies in which it invests - most recently, McDonalds and Wendy's. Currently, Perishing Square has only filed a 13G indicating that this is only a passive investment. However, activist hedge funds occasionally use this filing type to acquire shares quietly before taking a more active stance, since it does not require a "Purpose of Transaction". If and when Pershing Square takes a more active stance in the company, it will be forced to file a 13D with the SEC which will outline its investment objectives. Given Bill Ackman's background, this is a distinct possibility, and definitely a stock worth watching.

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3Com (NDAQ:COMS) reported a Q2 loss of $0.01 per share, including restructuring, amortization and stock-based compensation expense of $20 million, or $0.05 per share. The consensus stood at $0.00.

Ultratech Inc. (NDAQ:UTEK) lowered their guidance today. The company currently expects revenue to be down 25% to 30% sequentially from the third quarter 2006 compared to earlier guidance of revenue being down 8% to 10% sequentially as of October 2006. Q4 EPS is expected to be between $0.25 to $0.30 share. This compares with earlier guidance of $0.10 to $0.15 per share.

PMC-Sierra, Inc. (NDAQ:PMCS) now expects revenues for the fourth quarter to be between $100 to $105 million. The company's previous outlook was for a revenue range of $105 million to $112 million. The consensus stands at $108.9 million.

Cognos (NDAQ:COGN) reported Q3 EPS of $0.48 today - five cents better than estimates. Revenues were $247.8 million versus $241.11 million consensus. They predict Q4 revenues of $270 to $280 million versus the consensus of $276.4 million. They also foresee FY07 Non-GAAP EPS of $1.64 to $1.70 versus the consensus of $1.61. FY07 revenues are aimed to be around $965 to $975 million versus the consensus of $964.3 million.

Accenture (NYSE:ACN) reported Q1 EPS of $0.46, $0.04 cents better than estimates. Revenues were $4.75 billion versus $4.51 billion consensus. The company foresees Q2 revenues of $4.6 to $4.8 billion versus the consensus of $4.49 billion, while they raised their FY07 EPS outlook to $1.80 to $1.85, up from its previously expected range of $1.77 to $1.82. The consensus currently stands at $1.83.

Anheuser-Busch Cos. Inc. (NYSE:BUD) said its Board of Directors has approved a new, more aggressive leverage target to enhance shareholder value. The company intends to modestly increase leverage and reduce its cash flow to total debt target from the previous 30% to 40% range to the 25% to 30% range. In conjunction with the more aggressive leverage target, the Board of Directors of Anheuser-Busch Cos. Inc. has approved a new 100 million share repurchase program.

PHC, Inc., d.b.a. Pioneer Behavioral Health (OTCBB:PIHC) has finalized a contract with Behavioral Healthcare Options (BHO), a subsidiary of Sierra Health Services, Inc. (NYSE:SIE). The contract calls for Pioneer to operate four clinics in the BHO network in Las Vegas and northern Arizona, effective January 1, 2007. The contract is valued at $80 million, with an initial term of 10 years, or approximately $8 million annually. The contract more than doubles Harmony's annual revenues, from $5 million to approximately $13 million. The contract is expected to be accretive to the company during the first year of deployment.

M & F Worldwide Corp. (NYSE:MFW) and John H. Harland Company (NYSE:JH) announced that they have entered into a definitive merger agreement for M & F Worldwide to acquire Harland for $52.75 per share in cash, representing an approximate transaction value of $1.7 billion.

FedEx Corporation (NYSE:FDX) reported Q2 EPS of $1.64 versus the consensus of $1.76. Revenues came in at $8.93 billion versus the consensus of $8.91 billion, with Q3 EPS of $1.20 to $1.35 versus the consensus of $1.55. They foresee a Q4 EPS of $1.98 to $2.13.

CarMax Inc. (NYSE:KMX) reported Q3 EPS of $0.42, versus the consensus of $0.25. Revenues came in at $1.77 billion versus the consensus of $1.63 billion, with FY EPS of $1.75 to $1.85, versus the consensus of $1.55 to $1.65; the consensus stands at $1.64.

ElkCorp (NYSE:ELK) was a company that we first covered in early November, when we reported that the company considered putting itself up for sale. Since then the company moved up more than 25% after it accepted an offer from The Carlyle Group at $38 per share, outbidding Building Materials Corporation of America's $35 bid.

Now, there are rumors that Building Materials Corporation may be contemplating higher bid. The group currently controls over 10% of the company's outstanding shares, giving them excellent leverage in any battle for the company. Meanwhile, shareholders have jumped the price up over 5% to $40.90 in today's trading, giving substance to the rumors. This is definitely a stock worth watching as this situation unfolds; however, it remains a risky investment right now, trading above the sole accepted offer.

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DRAXIS Health Inc. (NDAQ:DRAX) announced today that it received approval from the TSX to renew its Normal Course Issuer Bid. This enables the company to repurchase up to 3,397,011 of its common shares, which represents nearly 10% of its float. The company's board determined that the underlying value of the Company is not reflected in the current market price of its common shares and has thus concluded that the repurchase of common shares pursuant to the proposed normal course issuer bid presently constitutes an appropriate use of financial resources and would be in the best interest of shareholders.

Intersil Corporation (NDAQ:ISIL) approved a $400 million stock buyback program. This is significant because it represents around a 10% repurchased based on today's prices, given the company's market cap of just over $3.3 billion. The company noted that the funding for this repurchase would come from future free cash flows along with a portion of their cash on hand.

UST Inc. (NYSE:UST) announced that it would be increasing its dividend 5.3% and instituting a $200 million share buyback program. While the share buyback only represents approximately 2% of the company's market cap at current prices, the moves do illustrate management's confidence in the company's future cash flows and committment to increasing shareholder value. The stock moved up 2% on the news in intraday trading.

The Brink's Company (NYSE:BCO) is again in the news today as Pirate Capital makes a move on the company. In a 13D/A filing with the SEC, Pirate disclosed an 8.5% stake in the company and said that they intended to nominate two of its own people to the board of directors at the next shareholder election. Specifically, the filing stated:

"The Issuer has not responded to Pirate's request that Thomas R. Hudson Jr. immediately be appointed to the Issuer's Board of Directors other than to indicate that Mr. Hudson's nomination for election to the Board will be considered in due course. Pirate is now contemplating proposing two additional nominees for election at the upcoming annual meeting. In the event that Pirate proposes the additional nominees, Pirate intends to give notice of their nomination for election to the Board, along with the notice of Mr. Hudson's nomination, prior to the expiration of the time set for shareholder nominations in the Issuer's by-laws." (Read More)

This move comes shortly after MMI Investments came out in support of any activist investors that would institute change in the company. As we said before, the combined group now accounts for nearly 25% of the company's outstanding shares. With such a large stake, this coalition has a good chance of forcing the board of directors to at least consider the possibility of a sale in 2007.

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Redback Networks Inc. (NDAQ:RBAK) announced a definitive agreement to be acquired by Ericsson (NDAQ:ERIC) for $2.1 billion ($25/share).

Hydril (NDAQ:HYDL) expects its fourth quarter 2006 earnings to be around $1.05 per diluted share (above previous expectations) primarily due to improved premium connection segment results. The current consensus stands at $0.87.

Darden Restaurants (NYSE:DRI) reports Q2 EPS of $0.41, one cent better than estimates.  Revenues were $1.39 billion versus $1.4 billion consensus.  Olive Garden's second quarter sales of $662.1 million were 7.1% above the previous year. The company expects total sales growth of between five and six percents in fiscal 2007.

Harrah's Entertainment, Inc. (NYSE:HET) has entered into a definitive agreement for affiliates of Texas Pacific Group (TPG) and Apollo Management, L.P. to acquire Harrah's in an all-cash transaction valued at approximately $27.8 billion, including the assumption of approximately $10.7 billion of debt.  Under the terms of the agreement, Harrah's stockholders will receive $90.00 in cash for each outstanding Harrah's share.

Christopher & Banks (NYSE:CBK) reported Q3 EPS of $0.24, in-line with estimates. Revenues were $139.3 million verus $142.13 million consensus. For the fourth quarter, earnings are anticipated to be in the range of $0.13 to $0.14 per diluted share. The current Q4 EPS consensus stands at $0.18.  

Palm, Inc. (Nasdaq:PALM) reports Q2 EPS of $0.12 versus the consensus of $0.15. Revenues came in at $392.9 million versus the consensus of $392.3 million. They predict Q3 revenues to be around $400 to $410 million versus the consensus of $416.6 million.

PSS World Medical, Inc. (NASDAQ:PSSI) has revised its fiscal year 2007 financial guidance due to lower sales of influenza vaccine compared with previous expectations. The company revised its fiscal year 2007 earnings per share goal to $0.69 to $0.71 per diluted share. The company reiterated its goal of achieving $58 to 60 million of cash flow from operations for fiscal year 2007.The current FY07 EPS consensus stands at $0.78.

Endeavor Acquisition Corp. (AMEX:EDA) is higher this morning after announced a definitive merger agreement to acquire American Apparel Inc., a leading domestic vertically-integrated manufacturer and retailer of cotton fashion basics and the largest T-shirt manufacturer in the United States.  Endeavor will also assume up to $110 million of net debt outstanding, create a one-time merger bonus pool of $2.5 million, and reserve up to approximately 2.7 million shares of additional Endeavor stock under a plan to be made available for issuance to American Apparel employees.

Alliance Imaging, Inc. (NYSE:AIQ) announced its financial guidance for 2007.  Full year 2006 revenue is expected to range from $452.5 million to $455.5 million.  The current FY06 EPS consensus is $456.20 million. For FY07, the company expects revenue to range from $431 million to $443 million versus consensus of $460.34 million.

Circuit City Stores, Inc. (NYSE:CC) reported a Q3 loss of $0.09 versus the consensus for a profit of $0.07. Revenues were $3.1 billion versus a $3.12 billion consensus. The company foresees the net sales growth between 8% to 9%, down from 9% to 11%.  

Scholastic Corporation (NASDAQ:SCHL) reported Q2 EPS of $1.75, four cents better than estimates. Revenues were $735.5 million versus a $702.97 million consensus.  Scholasticed continues to expect fiscal 2007 revenue of $2.1 to $2.2 billion, earnings per diluted share of $1.55 to $1.85. The current FY07 revenue consensus is $2.15 billion and EPS is $1.69.

The Brink's Company (NYSE:BCO) may find itself in trouble soon as an increasing number of shareholders are taking an active role in changing the company. We first mentioned Brinks back in September of this year (when the stock was at $57 per share) when activist hedge fund Pirate Capital, an 8.5% holder of the company, expressed its opinions on the company's future direction. In a letter attached to a 13D filing at the time, Pirate said that the company would represent an excellent buyout candidate due to its market leadership, and could attract offers between $68 and $72 per share. Later, in November, Steel Partners (another major activist hedge fund) increased their stake from 5.5% to 8%. Now, MMI Investments added their support to the cause issuing the following letter in their recent 13D/A filing with the SEC:

"MMI Investments, L.P. is the owner of 4,008,000 shares of The Brink’s Company (“BCO”) or approximately 8.3% of the outstanding stock. We believe BCO’s brands, financial performance, market positions and management are among the best in its industry. We therefore remain extremely frustrated with its continued undervaluation relative to its operating success, its peers’ trading multiples and the value it might achieve from pursuing one of several potential strategic alternatives.

Another large stockholder has raised the question of BCO pursuing a strategic alternatives review and indicated that it intends to submit a stockholder proposal to that effect at BCO’s 2007 annual meeting of stockholders. As we understand the proposal described in their Schedule 13D amendment, we are in support of it. The reasons for our support are reflected in our presentation transmitted for filing with the SEC today, a copy of which is enclosed herein, which indicates that BCO has many attractive, value-enhancing strategic options including an LBO, sale to a strategic acquiror, tax-free split-up of the company, leveraged recapitalization or another significant stock repurchase. Details underlying these analyses are included in the presentation materials, but in summary we believe that BCO’s potential value from following one of these strategic alternatives is likely to be $70 or more per share. Moreover, we believe that because BCO has multiple options, more than one could be explored simultaneously which we believe makes the likelihood of success much greater.

For the reasons described in the accompanying presentation materials, we believe that, as with the BAX sale process last year, BCO’s stockholders’ interests could best be served by a formal review of strategic alternatives by a qualified investment banker, whose mandate would include an active canvassing of potential buyers and the debt and equity markets. As discussed therein, BCO’s valuation and operations are complex subjects which require explanation and study to appreciate fully. We believe that several factors obscure the value that potentially could be achieved by pursuing strategic alternatives, such as the expected significant increase in 2007 (and beyond) EBITDA, the future transference of the cash burden of the legacy liabilities from the company’s operations to the VEBA assets (which we believe will shortly be overfunded if not utilized soon) and the aggressive growth of BHS which hinders cash flow generation. We believe that an active canvassing of the market is essential in order that interested parties properly appreciate these factors in estimating BCO’s true value.

Further, we believe that given the current strength of the mergers and acquisitions market (as evidenced yesterday in the robust price paid for HSM Electronic), as well as the equity and credit markets, that BCO would be well advised to pursue its alternatives in the beginning of 2007. A costly and time-consuming proxy contest with such stockholder during the first half of 2007 unnecessarily risks missing this window of opportunity." (Read More)

Combined, these investors account for nearly 25% of the company's outstanding shares. With such a large stake, this coalition has a good chance of forcing the board of directors to at least consider the possibility of a sale in 2007. The stock is currently trading up more than 6.7% on the news, sitting at $64.23. The fundamental valuation of the company along with this coalition of activist shareholders bent on unlocking value make BCO a stock worth watching in the next couple of months.

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Biomet, Inc. (NDAQ:BMET) agreed to be acquired today for $44 per share by a private equity group consisting of members of the Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts & Co. and TPG. The $10.9 billion deal is expected to close on or prior to October 31, 2007.

We first mentioned this company back on November 2nd when there were rumors that Smith & Nephew (NYSE:SNN) was interested in the company. The stock was trading around $38 per share before rising around 15% to its current levels after receiving the current private equity offer at $44 per share. Now rumors have surfaced that Smith & Nephew may become a buyout target, with potential bids from companies like Zimmer (ZMH), Johnson & Johnson (JNJ), and Stryker (SYK). This makes SNN a stock to watch if the Biomet transaction does go through.

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CEMEX, S.A.B. de C.V. (NYSE:CX) expects Q4 revenue of $4.3 billion, an increase of 9% versus the same period a year ago; the current consensus is $4.21 billion. For the full year 2006, CEMEX expects to meet its guidance of $4.1 billion, an increase of 15% versus the same period last year.

Oracle Corporation (NDAQ:ORCL) reports Q2 EPS of $0.22, in line with estimates. Total revenues were $4.16 milion versus the $4.15 billion consensus.

Applied Signal Technology (NDAQ:APSG) reports Q4 EPS of $0.05 versus consensus of $0.22.  Revenues were $45.38 million versus $59.58 million consensus.

DynCorp International (NYSE:DCP) shares are trading higher after reports surfaced that the company has been awarded an Army contract worth as much as $4.6 billion.

ElkCorp (NYSE:ELK) announced it has entered into a definitive agreement to be acquired and taken private by global private equity firm The Carlyle Group in an all-cash transaction valued at approximately $1.0 billion, including the assumption of approximately $173 million of net debt. Under the terms of the agreement, ElkCorp shareholders will receive $38.00 in cash for each outstanding ElkCorp share. This represents a premium of approximately 51% over ElkCorp's closing share price on November 3, 2006. We discussed the possibility of this buyout in a previous article.

Joy Global Inc. (NDAQ:JOYG) reports Q4 EPS of $0.71, which was 5 cents better than estimates. Revenues were $689 million versus a $655.64 million consensus. Revenues over the coming 12-months are expected to be in the range of $2.70 to $3.00 billion, EPS is expected to be between $2.85 to $3.25. Current FY07 revenue consensus is $2.84 billion and EPS consensus is $2.95.

Matria Healthcare, Inc. (NDAQ:MATR) foresees FY07 EPS between $1.67 to $1.74 and revenues between $385 to $395 million, higher than the current FY07 EPS consensus of $1.36 and revenue consensus is $386.34 million.

Exelixis, Inc. (NDAQ:EXEL) and Bristol-Myers Squibb Company (NYSE:BMY) announced a worldwide collaboration today. Bristol-Myers Squibb will pay Exelixis an upfront payment of $60 million in cash. Exelixis will also receive $20 million for each of up to three different drug candidates selected by Bristol-Myers Squibb at IND.

Norsk Hydro (NYSE:NHY) and Statoil (NYSE:STO) have agreed to recommend to their shareholders a merger of Hydro's oil and gas activities with Statoil, creating the world's largest offshore operator with a strengthened platform for future growth.

Express Scripts, Inc. (NDAQ:ESRX) offered to acquire Caremark Rx, Inc. (NYSE:CMX) for $29.25 in cash and 0.426 shares of Express Scripts stock for each share of Caremark stock. The offer has a value of around $58.50 per Caremark share or approximately $26 billion in the total.