Friday, March 02, 2007
Great Wolf Resorts, Inc. (NDAQ:WOLF) shares moved up $0.18, or 1.36%, to $13.37 today after Jason Ader demanded that the company maximize shareholder value by immediately putting itself up for sale in a Schedule 13D/A filing with the SEC. The 7.78% shareholder continues to believe that management is simply unable to unlock shareholder on its own and expressed its disappointment with management's refusal to explore a possible sale. This comes after they made similar recommendations to the company back in August.

Why should the company be put up for sale? According to Mr. Ader, the company's management is simply unable to effectively capitalize on a growing market that is attracting more and more private equity and investment interest. While WOLF once dominated the indoor water parks market, there are now new, better capitalized and savvy developers. Mr. Ader noted that: the company just took large, non-deductible write-offs for goodwill impairment at two of their major resorts, development and construction costs are increasing (together with competition), and the company's prospects as a stand-alone aren't materially brighter today than they were last year. Meanwhile, the market continues to ignore and undervalue the company despite four analyst buys with a $16.50 target. According to Mr. Ader, "I continue to believe there is intrinsic value in the business, but I don't have confidence that current management or the current board can - on their own - unlock this value for shareholders.  I find it irresponsible that Mr. Emery simply refused to return any follow-up calls from the UBS bankers - and has not begun any alternative sale process. Now is not the time to continue to wait for performance to bail you out.  As I said last August, it's not happening."

Mr. Ader attached two charts to his filing to illustrate the company's failure:

Here it is very clear that WOLF started out by outperforming its peer group, but quickly deteriorated to its current levels. And a comparison with the overall market is no better:


Clearly, WOLFs shares have been underperforming both their peers and overall market averages. In the end, Mr. Ader believes that other large shareholders share his sentiment, and that there would be significant interest within the private equity community - or among the strategic players - in a transaction involving WOLF. Consequently, he is again demanding that the company at least hire an investment banker to explore possible strategic alternatives. If the company refuses, it will be interesting to see if Ader would consider going as far as a proxy fight to unlock value. Alternatively, we could see additional institutional shareholders voice their support for these ideas. Either way, if the company agrees, we could see significant share appreciation. This makes WOLF a stock worth keeping an eye on!

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Interstate Hotels and Resorts, Inc. (NYSE:IHR)
Lodgian, Inc. (AMEX:LGN)
3/2/2007 5:57:13 PM UTC  #    Comments [0]  |  Trackback
Berkshire Hathaway's (NYSE:BRK) Warren Buffet released his annual letter to shareholders yesterday, announcing a $16.9 billion gain in net worth. Many investors consider the Oracle of Omaha's annual letter to shareholders required reading, as Buffet offers his views on the economy and general market outlook. What does Buffet think about the future of our economy and stock market prospects? Let's take a look...

On the economy, Buffet commented:
As our U.S. trade problems worsen, the probability that the dollar will weaken over time continues to be high. I fervently believe in real trade – the more the better for both us and the world. We had about $1.44 trillion of this honest-to-God trade in 2006. But the U.S. also had $.76 trillion of pseudo-trade last year – imports for which we exchanged no goods or services. (Ponder, for a moment, how commentators would describe the situation if our imports were $.76 trillion – a full 6% of GDP – and we had no exports.) Making these purchases that weren’t reciprocated by sales, the U.S. necessarily transferred ownership of its assets or IOUs to the rest of the world. Like a very wealthy but self-indulgent family, we peeled off a bit of what we owned in order to consume more than we produced.

The U.S. can do a lot of this because we are an extraordinarily rich country that has behaved responsibly in the past. The world is therefore willing to accept our bonds, real estate, stocks and businesses. And we have a vast store of these to hand over.

These transfers will have consequences, however. Already the prediction I made last year about one fall-out from our spending binge has come true: The “investment income” account of our country – positive in every previous year since 1915 – turned negative in 2006. Foreigners now earn more on their U.S. investments than we do on our investments abroad. In effect, we’ve used up our bank account and turned to our credit card. And, like everyone who gets in hock, the U.S. will now experience “reverse compounding” as we pay ever-increasing amounts of interest on interest.

I want to emphasize that even though our course is unwise, Americans will live better ten or twenty years from now than they do today. Per-capita wealth will increase. But our citizens will also be forced every year to ship a significant portion of their current production abroad merely to service the cost of our huge debtor position. It won’t be pleasant to work part of each day to pay for the over-consumption of your ancestors. I believe that at some point in the future U.S. workers and voters will find this annual “tribute” so onerous that there will be a severe political backlash. How that will play out in markets is impossible to predict – but to expect a “soft landing” seems like wishful thinking.
On executive compensation, he noted:
You’ve read loads about CEOs who have received astronomical compensation for mediocre results. Much less well-advertised is the fact that America’s CEOs also generally live the good life. Many, it should be emphasized, are exceptionally able, and almost all work far more than 40 hours a week. But they are usually treated like royalty in the process. (And we’re certainly going to keep it that way at Berkshire. Though Charlie still favors sackcloth and ashes, I prefer to be spoiled rotten. Berkshire owns The Pampered Chef; our wonderful office group has made me The Pampered Chief.)

CEO perks at one company are quickly copied elsewhere. “All the other kids have one” may seem a thought too juvenile to use as a rationale in the boardroom. But consultants employ precisely this argument, phrased more elegantly of course, when they make recommendations to comp committees.

Irrational and excessive comp practices will not be materially changed by disclosure or by “independent” comp committee members. Indeed, I think it’s likely that the reason I was rejected for service on so many comp committees was that I was regarded as too independent. Compensation reform will only occur if the largest institutional shareholders – it would only take a few – demand a fresh look at the whole system. The consultants’ present drill of deftly selecting “peer” companies to compare with their clients will only perpetuate present excesses.
Clearly, Buffet offers some valuable insight here that can be applied to far more than just Berkshire Hathaway. I encourage you to read his full letter here, as it contains far more information on different sectors, governance, advice on valuing securities, different ancedotes, and much more. It is definitely required reading for all long-term value investors.

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3/2/2007 5:11:11 PM UTC  #    Comments [1]  |  Trackback
Hilton Hotels (NYSE:HLT) has agreed to sell the Scandic Hotel chain to European private equity group EQT for about $1.1 billion as it seeks to reduce debt. Hilton is targeting an investment grade credit rating after taking on debt to buy Hilton International in February 2006 in a $6 billion deal. Scandic was part of the Hilton International deal and was put up for sale in August. Hilton expects the sale of Scandic, the largest hotel operator in the Nordic region with 132 hotels, to reduce 2007 recurring earnings by $0.10 a share.

Britain's EMI Group (NYSE:EMPIY) rejected a $4.1 billion cash takeover proposal from Warner Music Group, saying the price was inadequate and not in the best interests of its shareholders. The world's third-largest music company held a board meeting on Friday after getting a non-binding proposal from Warner which indicated it might be prepared to make a bid at 260 pence per share. EMI has also been in talks with private equity firms including One Equity Partners, a unit of JPMorgan Chase, as potential alternatives.

Gen-Probe (NDAQ:GPRO) has won U.S. approval to sell its Procleix blood test to detect the West Nile virus, a Food and Drug Administration spokeswoman said Friday. The test is designed to screen donated blood, tissue and organs for the virus.

Bristol West Holdings
(NYSE:BRW) shares jumped 36% Friday after the company agreed to be acquired by Zurich Financial for $712 million in cash, or $22.50 a share. That's a 39% premium to Bristol's close on Thursday.

Shares of Dendrite International (NDAQ:DRTE) jumped 21% after Cegedim S.A. agreed to acquire the company for $16 a share in cash. The deal values Bedminster, N.J.-based Dendrite, a provider of sales and marketing products and services to the pharmaceutical industry, at roughly $751 million.

Methode Electronics (NDAQ:METH) shares rose 12% after the company said Q3 sales rose to $105.4 million from $95.1 million a year earlier. Quarterly net income for the global maker of electronic components and subsystem devices was $4.7 million, or $0.13 a share, compared with $2.8 million, or $0.08 a share, a year earlier.

Shares of Palm Inc. (NDAQ:PALM) jumped 11% amid a fresh media reports that the maker of handheld wireless devices might be acquired by Nokia Corp.

Scottish Re Group Ltd. (NYSE:SCT) shares rose 11% after the company said the company's shareholders approved proposals relating to an investment of $300 million each by MassMutual Capital Partners LLC and an affiliate of Cerberus Capital Management L.P.

Advocat (NDAQ:AVCA) shares tumbled 28% Friday after the Brentwood, Tenn.-based health care services provider reported Q4 net earnings of $2.28 million, or $0.37 a share, down from $12.9 million, or $1.99 a share, in the year-ago period. Revenue rose 3.8% to $55.8 million from $53.7 million. The company expects 2007 results in a range of a loss of $0.08 a share to a profit of a penny a share on revenue of $221 million to $228 million.

AMN Healthcare Services Inc.'s (NYSE:AHS) shares fell 15% after the company reported that their Q4 net income jumped 44% to $10 million, or $0.29 a share, from $6.98 million, or $0.21 a share, a year earlier. The San Diego company's revenue grew to $283.5 million from $221.4 million.

Atlantic Tele-Network (NDAQ:ATNI) shares fell 11% after the company said it doesn't expect organic growth in earnings for 2007 to be as strong as it was in 2006 although it does expect to grow consolidated profits. The company posted earnings of $23.2 million, or $1.70 a share, for the year, on revenue of $155.4 million.

Credence Systems Corp. (NDAQ:CMOS) shares tumbled 25% after the company reported a Q1 net loss of $11,000, or breakeven on a per-share basis, compared with a net loss of $4.05 million, or $0.04 a share, during the year-ago period. The Milpitas, Calif.-based semiconductor-testing-equipment company posted revenue of $118.8 million versus $121.8 million.

Delta Air Lines Inc. (OTC:DARLQ) shares lost 6.9% after the company said its loss in January was $109 million, compared with a $300 million loss in January 2006. Delta's consolidated passenger unit revenue rose 3.7% in January over the same month in 2006. The Atlanta-based airline said its monthly operating expenses "remained essentially flat" despite a capacity increase of 2.9%. Delta is currently in Chapter 11 reorganization and is expected to exit bankruptcy in the coming months.

Gulf Island Fabrication (NDAQ:GIFI) shares tumbled 25% after the Houma, La.-based maker of offshore drilling and production platforms reported Q4 net earnings of $3.73 million, or $0.26 a share, up from $2.7 million, or $0.22 a share, in the year ago period. Revenue rose to $76 million from $41.4 million.

Leapfrog Enterprises (NYSE:LF) shares sank 8.4% after the company reported a Q4 loss of $46.0 million, or $0.73 a share, on sales of $182.8 million. In the same period a year earlier, the educational products developer earned $14.4 million, or $0.23 a share, on sales of $248 million.

OmniVision Technologies Inc. (NDAQ:OVTI) shares sank 7.2% after the company reported Q3 net earnings of $4.13 million, or $0.07 a share, down from $29.6 million, or $0.53 a share, during the year-ago period.

3/2/2007 12:43:43 AM UTC  #    Comments [0]  |  Trackback
 Thursday, March 01, 2007
American Strategic Income Portfolio, Inc. (NYSE:BSP) is yet another mortgage-related closed-end investment company being targeted by hedge funds because they are trading well below net asset value (NAV). These hedge funds are attempting to unlock this "hidden" NAV by either converting them to an open-end fund or by establishing a real estate investment trust (REIT). Unlike closed-end funds, open-end funds are tied to NAV by definition. Meanwhile, REITs provide additional tax benefits and flexibility, which would theoretically make it easier for company's to realize the value of their assets. However, actually assigning numbers to these assets can be exceedingly difficult, as mortgage-backed securities are one of the most complex financial instruments in the marketplace.

Sit Investment Associates a 14% holder that is attempting to make such changes at BSP, according to their Schedule 13D/A filing with the SEC. On January 28, 1998, the hedge fund sent a letter to company's management team making several proposals that were eventually carried out two months later. These proposals eventually led to the company repurchasing 10% of its outstanding shares at NAV in an effort to bridge the gap between market price and intrinsic value. Later, SIA proposed that the company reorganize as a REIT, which was approved but never carried out. Now SIA is seeking to obtain the adoption of policies or strategies by the company that would tend to reduce or eliminate the discount at which the shares of the company will trade in the future, such as the re-purchase policies discussed above, or that would otherwise enable shareholders to liquidate shares of the company at the company's net asset value. If SIA is successful in obtaining any adoption of these policies, it could mean significant share appreciation from the company's current levels. This makes BSP a stock worth watching over the next few months!

3/1/2007 7:09:02 PM UTC  #    Comments [0]  |  Trackback
Motorola, Inc. (NYSE:MOT) shares jumped $0.61, or 3.29%, to $19.13 today after the company issued a press release confirming that Carl Icahn and his partners are planning to purchase more than $2 billion worth of additional shares. The large transaction could potentially leave Icahn with a 4.4% stake in the company, making him the second largest institutional shareholder. The 1.6% holder was required to inform the company of this pending purchase under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, which will also require him to wait an additional 30 days before buying more stock.

It is already well known that Carl Icahn is seeking representation on the company's Board of Directors and wants to unlock shareholder value through a massive share buyback program. Given his many prior successes in unlocking shareholder value through similar strategic alternatives (most recently the Temple-Inland breakup), it is very possible that he will succeed in generating value. Moreover, he should not have trouble gaining support for his proposals with many investors somewhat irked over the company's excessive cash on hand. Combined, these factors make MOT a stock that is definitely worth watching over the next few months!

Related Companies
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Microsoft Corporation (MSFT)
C-COR Incorporated (CCBL)

3/1/2007 4:18:46 PM UTC  #    Comments [0]  |  Trackback
Dell (NDAQ:DELL) posted net income for its fiscal Q4 ended Feb. 2 of $673 million, or $0.30 a share, and revenue was $14.4 billion. In the same quarter last year, Dell reported net income of $1.01 billion, or $0.43 a share, on revenue of $15.18 billion.

American International Group (NYSE:AIG), the world's largest insurer by market value, said Q4 earnings rose sharply from a year ago. Net income was $3.44 billion, or a $1.31 share, compared with $444 million, or $0.17, a year ago. AIG also expanded its stock buyback plan by $8 billion. AIG says it intends to buy $5 billion worth of common stock during 2007.

Berkshire Hathaway (NYSE:BRK) reported higher full-year profit, helped by gains in its core insurance operations -- a welcome relief from two years of billion-dollar payouts for hurricane claims. Buffett said the company's net worth rose by $16.9 billion, or 18.4%, in 2006. While Geico had a blockbuster year, Berkshire’s non-insurance businesses also did well, with earnings up 38%.

Struggling apparel giant Gap Inc. (NYSE:GPS) said that their Q4 net profit fell 35% on lower or flat sales at its two main casual clothing chains and dependence on holiday season discounts. The global retailer, which is searching for a new chief executive after the January departure of Paul Pressler, said net income dropped to $219 million, or $0.27 a share, from $337 million, or $0.39 per share, a year earlier.

Motorola (NYSE:MOT) said it received notice that Carl Icahn and three of his entities have filed to buy more than $2 billion, or 4.4%, of the company's common stock, potentially making the financier Motorola's second biggest institutional holder. Motorola has a market capitalization of $45.56 billion, based on Wednesday's closing share price of $18.52.

Business software maker Oracle (NDAQ:ORCL) will buy Hyperion Solutions for $3.3 billion in cash, renewing a shopping spree aimed at toppling rival SAP. The deal announced Thursday will give Oracle an arsenal of Hyperion products that are widely used by SAP's customers. Santa Clara-based Hyperion represents the largest prey to be devoured by Oracle since it gobbled up Siebel Systems for $6.1 billion a little over a year ago. Redwood Shores-based Oracle will pay $52 per share for Hyperion. The price represents a 21% premium above the most recent closing price of Hyperion's stock, which has traded between $26.65 and $45.18 during the past year. Hyperion shares surged $8.69, or 20.3%, to $51.53 in afternoon trading on the Nasdaq Stock Market, where Oracle shares gained $0.39, or 2.4%, to $16.83.

Retailer Kohl's (NYSE:KSS) reported higher Q4 profit as sales were aided by new stores and goods sold exclusively at the chain. Earnings rose 29%, coming to a total of $484.6 million, or $1.48 a diluted share for the quarter ended Feb. 3, compared with $374.9 million, or $1.08 a diluted share, a year earlier. The earnings topped analyst consensus forecasts, which had projected a quarterly profit of $1.43 a share.
 
Sears Holdings (NYSE:SHLD) reported higher Q4 profit, helped by property sales and higher operating income at its Sears and Kmart divisions. The Hoffman Estates, Ill., company said earnings rose 27%, as margins improved despite weaker sales at established stores. Earnings for the quarter ending Feb. 3 totaled $820 million, or $5.33 a share, from $648 million, or $4.03 a share, in the same period last year.

Shares of Constellation Brands (NYSE:STZ) fell to a two-year low after the company provided a weak fiscal-year 2008 forecast, citing ongoing challenges in the U.K. retail environment and an oversupply of Australian wine. The world's largest wine maker by volume estimates fiscal 2008 earnings before items of $1.30 to $1.40 a share, or net income of $1.21 to $1.31 a share. Sales are expected to decline 12% to 14%, hurt by a change in the way it reports its Crown Imports joint venture. Constellation shares fell as low as $18.92, setting a two-year low for the stock. Previously, the stock fell as low as $19.65 in November 2004. The stock was among the biggest moves in the market on Thursday.

Swiss Re said General Electric (NYSE:GE) would divest its stake worth around 3.5 billion Swiss francs ($2.9 billion), selling half to Swiss Re and placing the other half in the market. Swiss Re had waived a lock-up period on the shares, which General Electric had received as part of the payment for its reinsurance units, which it sold for $7.4 billion to the Swiss reinsurer last year.

3/1/2007 3:01:09 AM UTC  #    Comments [0]  |  Trackback
 Wednesday, February 28, 2007
LMP Real Estate Income Fund Inc. (NYSE:RIT) is a non-diversified, closed-end management investment company that invests in securities related to the real estate industry. The company has recently come under fire from investors concerned with the share price's discount to the company's net asset value (NAV). Spearheading the shareholder revolt is Stevenson Capital Management, who first expressed concern back in May 2006. The 9.6% holder renewed its threats in a Schedule 13D/A filing today, where it said that if the company did not take immediate action to correct the discount they would seek to replace members of the Board of Directors with a proxy fight.

What steps does Stevenson want the company to take to unlock this value? Well, the fund outlined three key solutions in their filing:
  1. Within the next sixty days, the company urged the fund to sell sufficient assets to eliminate the company's leverage, which, in turn, will generate realizable net capital gains of approximately $5.00 per share to the shareholders.
  2. Secondly, they demanded that the company commence a tender offer or a series of tender offers (or a reasonably structured open-market share repurchase program) to repurchase at least 400,000 shares of the company's common stock. Moreover, they noted that the transaction may need to be financed by selling assets, as mentioned above.
  3. Finally, they demanded that the company commit to file with the SEC within a reasonable period of time, not to exceed 90 days, an application for an exemptive order that would allow the implementation of a managed distribution plan under Section 19(b) of the Investment Company Act of 1940 which will pay a dividend to the shareholders at an annual rate of 8% of NAV.
Stevenson then continued by outlining what would happen if the company did not comply with shareholder demands:
We realize that our approach presents a direct course of action. Our underlying proposition is that not enough of the value locked within the Fund is benefiting the shareholders. The value of the Fund belongs to the shareholders and we want management of the Fund to affirmatively take action to return a portion of that value to the shareholders. While your lack of response to our prior overtures have prevented us from having a meaningful dialog, I would again extend a sincere offer to you and your board to discuss the Fund’s future with us. If necessary, we are fully prepared to move forward to propose a slate of directors for election at the upcoming annual meeting of shareholders with individuals committed to realizing shareholder value and responding to shareholders concerns and to further propose for the consideration of the Fund’s shareholders that the Fund be converted from a closed-end to an open-end fund.

As the time to submit nominations and proposals under the Fund’s advance notice bylaws rapidly approaches, we hope that you realize that it would better serve the Fund and its shareholders if we could discuss our options rather than resort to a proxy fight. It is our hope that this letter serves as a catalyst to a meaningful dialogue.
Given the threat of a proxy fight at the upcoming annual meeting, it is likely that the company will at least respond to these demands. And clearly there is opportunity here if the company decides to positively respond to shareholder concerns. A return to NAV would mean significant share appreciation while a Section 19(b) distribution plan would unlock this value by distributing more to shareholders in the form of dividends. Combined, these factors make RIT a stock worth watching!

2/28/2007 9:43:22 PM UTC  #    Comments [0]  |  Trackback
Synta Pharmaceuticals Corp. (NDAQ:SNTA) shares continued their decline today despite strong insider buying since its initial public offering earlier this month. Synta is an early-stage drug development company with a rich portfolio of chemical compounds, small molecules and plant extracts that it mines for drugs that the company hopes will be able to battle skin cancer or inflammation ailments like rheumatoid arthritis. Interestingly, the company's shares are down over 15% from their highs while several members of management and the Board of Directors have disclosed large purchases in a series of Form 4 filings with the SEC. Moreover, Luxor Capital Group also disclosed a 6% stake in the company in a Schedule 13G - indicating institutional interest in the company. Typically when a company IPOs, management uses the opportunity to divest their shares in order to diversify their portfolio. Therefore, this combination of events is certainly worth a second look...

Who is buying up these shares and could they have any information that normal investors do not? Well, there are several company officers that reported purchases, including:
  • Eric Jacobson - Sr. VP, Research, and CMO - disclosed a 300 share purchase at $10/share on February 9th.
  • Martin Williams - Sr. VP, Business Dev., and CBO - disclosed a 200 share purchase at $10/share on February 9th.
  • Keith Gollust - Director - disclosed a 180,000 share purchase at $10/share on February 9th.
  • Robert Wilson - Director - disclosed a 100,000 share purchase at $10/share on February 9th.
  • Bruce Kovner - Director - disclosed a 720,000 share purchase at $10/share on February 9th.
Now, these numbers are not employee stock options, restricted stock grants, or stock awards - these are open market purchases of common stock using their own cash! One of the more interesting members of this group is Bruce Kovner, who readers of this blog may recognize as the manager of Caxton Associates - one of the more successful hedge funds on Wall Street. Currently, he alone holds around a million shares that he purchased for close to $10 million. Combined, this open market purchasing by company officers, directors, and a successful hedge fund manager make this stock one definitely worth watching!

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Merck & Co., Inc. (MRK)
2/28/2007 6:31:24 PM UTC  #    Comments [0]  |  Trackback
Shuffle Master, Inc. (NDAQ:SHFL) shares dropped more than 15% on yesterday after the company said it expects fiscal first quarter earnings to fall "significantly" below last years results due to lower revenues and higher costs associated with their February 1st Stargames acquisition. Other factors contributing to the windfall included the short-term impact from ending its Asia representative deal with Elixir Group Ltd. on February 4th, a $1.7 million revenue deferral related to a shipment to a Macau customer, and slower-than-expected rollout of multiplayer electronic table games.

Why are we concerned with a company that is under performing? Well, according to the company: "As a result of the near-term uncertainty associated with the factors discussed above, including, but not limited to, operational improvements in the company’s multi-player electronic table game business, including the evaluation of broader distribution relationships and the evaluation of various strategic alternatives for certain business segments, management has decided to temporarily suspend guidance for fiscal 2007." Shuffle Master CEO Mark Yoseloff said that the company would be evaluating all of their business segments in an effort to maximize long-term revenue growth, improve gross margins, and reduce operating costs. Restructurings can often provide opportunities to investors - particularly if they end up spinning off one of these segments. With shares near their 52-week low on what could be "short-term" windfalls, this is certainly a stock to keep an eye on!

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2/28/2007 4:24:04 PM UTC  #    Comments [0]  |  Trackback
 Tuesday, February 27, 2007
Ryerson Inc. (NYSE:RYI) shares dropped $1.99, or 5.71%, to $32.89 today after Owl Creek disclosed a 5.3% stake and expressed their dissatisfaction with the company's  management in a Schedule 13D filing with the SEC. The activist hedge fund said that they have reviewed Harbinger Capital's recommendations made on January 2, 2007 and concluded that they are not confident in current management's ability to improve the operating results of the company given the company's history of underperformance. Consequently, they said they would support Harbinger's slate of seven independent directors, whom they believe would add more specific industry experience and be more proactive managers of the company.

Why is change needed? Well, under the leadership of the current management team and Board of Directors, the company has underperformed its peer group in several key operating metrics such as inventory turns, margins, return-on-invested-capital, and share price returns. Indeed, the majority of the stock's rise over the past year was a result of Harbinger's proposal to replace the Board of Directors. Owl Creek is concerned that the current management team and Board of Directors are not sufficiently proactive in managing the company in an industry with a constantly changing business and operating environment.

The hedge fund also noted that it was strange that the current management team specified a number of new initiatives only after Harbinger filed its Schedule 13D in January. Meanwhile, the hedge fund siad it does not see evidence of a credible plan to support management's goals of improving underperforming service centers, achieving an inventory turn rate of 5x by the end of 2007, and operating more efficiently. And indeed, if there are actionable ways for the company to achieve these goals, it begs to question why these actions have only been implemented in response to shareholder pressure and have not been implemented sooner since the management team has been in place since 1999.

Overall, with the additional support of Owl Creek, it is increasingly likely that Harbinger's proposals will gain traction. Whether or not the Board of Directors is actually replaced depends on many factors; however, we do know that there is now increased pressure on management to perform. This makes RYI a stock worth watching!

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Olympic Steel, Inc. (ZEUS)
Nucor Corporation (NUE)

2/27/2007 7:36:37 PM UTC  #    Comments [0]  |  Trackback