The Topps Company, Inc. (NDAQ:TOPP) may face some strong shareholder opposition after it ousted two hedge fund managers from a committee built to evaluate possible rival bids to the company's standing $385.4 million buyout agreement with Michael Eisner's Tornate Co. The committee - which included Arnaud Ajdler from Crescendo Partners and Timothy Brog from Pembridge Capital Management - was initially setup by the company to seek better offers during the next 40 days after Topps was sued by a shareholder on March 8th who sought a higher sale price. Ajder and Brog, who collectively own 6.6% of the company, contend that the $9.75 per share offer was too low and expressed concern that the company did not show the company to all possible buyers (notably, director John Jones also opposed the bid).

Ajder fired back at management today in a letter attached to his Schedule 13D/A filing with the SEC. In the letter, he said that the company set a new low in corporate governance that would be taught in business schools as a clear illustration of poor corporate governance. Ajdler went on to note five concerns:

1. The board appointed two new people (who support the existing merger agreement!) with the power to monitor the day-to-day developments during the "go-shop" period and made it clear that the Ad Hoc Committee (of which Brog and Ajder were members) no longer had such authority. Why? The board reasoned that the two hedge fund managers could not adequately reprensent the best interest of shareholders!
2. The board created an Executive Committee consisting of all board members except Brog and Ajder. Instead of allowing them to voice their opinions in the company's board room, the company simply created a new committee to silence opposing views. Clearly this isn't in the best interest of shareholders.
3. The company failed to correct a statement that it made on March 7th to the WSJ in which it said, "'Over the past two years, we have been working with Lehman Brothers to examine all opportunities to deliver value, and no other superior proposals emerged in that time frame,' said a spokeswoman to the company." This statement gives the false impression that Topps was shopped or that alternative proposals were solicited before entering into a merger agreement at $9.75, which isn't true.
4. The board held a telephonic meeting in which none of the three directors who voted against the merger agreement were provided with an agenda. When a motion to have Topps issue corrective disclosure was duly made and seconded at the meeting, it was ruled out of order by the chairman because he said it wasn't on the agenda.
5. The company mischaracterized Ajder's comments opposing the deal as stemming solely from the fact that the process that led to the merger agreement was flawed because the board did not shop the company; however, the main reason was the inadequate offer price.

In the end, Ajder strongly urged the comapny to reconstitute the Ad Hoc Committee, to disband the Executive Committee and to make corrective disclosure. Topps continues to ignore the will of its shareholders and continues to be run as a private club, and according to the hedge fund, this must stop. If the company takes such corrective actions and additional bids are solicited, it could mean significantly higher offers for the company. This makes TOPP a stock worth watching!

Related Companies
Wm. Wrigley Jr. Company (WWY)
Champion Industries, Inc. (CHMP)
Consolidated Graphics, Inc. (CGX)

Metro One Telecommunications (NDAQ:INFO) shares moved up $0.12, or 5.91%, to $2.15 after Strategic Turnaround Partners LP (STEP) disclosed a 9.17% stake and expressed their concern over the current management and direction of the company in a Schedule 13D filing with the SEC. The hedge fund said that it has been supportive of the company's management and efforts to lower operating cost structure and respond to the loss of significant contracts; however, they now believe that the company's board and management develop an efficient and effective plan to realize the company's growth potential over the next year. Moreover, STEP said they read the 13D filing by Everest Special Situation Fund LP and agreed with the demands made to the company's board to maximize shareholder value, including bringing in an executive experienced in coporate restructurings. Finally, they asked that the company install one of its own nominees to the board of directors to help the company implement these changes.

Everest Special Situations Fund, an 8.1% holder, obtained board representation in April 2006, and has since been lobbying the board from within to take immediate action to restructure the company's operations and lower the company's cost structure in response to the loss of the company's largest customers and heavy operating losses. However, despite their efforts, the company has failed to take the immediate and aggressive measures necessary to make the company profitable. The hedge fund said that the company's chairman of the board, William Rutherford, has been slow to make important decisions and has not provided the leadership that the company needs to counteract these losses. As a result, Everest made three demands in a Schedule 13D/A filing that STEP now supports:

1. Call for the resignation of the company's chairman of the board, William Rutherford.
2. Elect a representative of one of the company's largest stockholders as a chairman of the board.
3. Hire a chief restructuring officer or similar executive who specializes in corporate turnarounds.

Finally, Everest said that it may seek to replace members of the company's board through a proxy contest at the next shareholders meeting if necessary. This is all good news for shareholders who have dealt with significant losses now for several years. The company's stock has dropped more than 98% since its highs in mid-2001, and the only way it is going to turn itself around is with a good turnaround team and confident leadership. Combined, these factors make INFO a stock worth watching!

Related Companies
NII Holdings, Inc. (NIHD)
American Tower Corporation (AMT)
Crown Castle International Corp. (CCI)

General Motors Corp. (NYSE:GM) fell 0.9%, even after the company returned to profitability in the fourth quarter, when it said that it is refunding $1 billion to its financing unit GMAC after selling 51% of the lending unit due to losses at its residential mortgage business.

Citigroup (NYSE:C) rose 0.7% after one of its executives said the bank won't lift its offer for Nikko Cordial any further. This is good news for investors after the company had already hiked its bid by 26% to $13.4 billion on Tuesday.

Google (NDAQ:GOOG) fell briefly today after Viacom (NYSE:VIA) filed a $1 billion lawsuit alleging that its YouTube unit used more than 160,000 of its videos without permission. Despite its prior successes, Viacom will likely face strong opposition by the well capitalized darling of Wall Street.

Accredited Home Lenders (NYSE:LEND) shares dropped over 65% after it said it is seeking more capital and exploring strategic options after paying about $190 million in margin calls since January 1st. This is the latest subprime lender that has been experiencing issues with the drastic increases in defaults.

New Century Financial (NYSE:NEW) shares were suspended today after the NYSE officially delisted their stock after shares fell by more than 50%. The company said that its obligations to Credit Suisse First Boston Mortgage Capital were $1.4 billion, up from the prior estimate of $900 million.

Boeing Co. (NYSE:BA) shares rose 1.9% after Continental Airlines increased a previous order of 20 Boeing 787 jets to 25.

Schering-Plough Corp. (NYSE:SGP) agreed to purchase Organon biosciences for $14.4 billion in cash from Holland's Akzo Nobel, which previously planned to sell part of the unit through an IPO.

Dollar General Corp. (NYSE:DG) jumped 25% after it agreed to be acquired by affiliates of buyout firm KKR in a transaction worth $7.3 billion.

Infospace Inc. (NDAQ:INSP) may face some shareholder criticism in the near future after Sandell Asset Mangement disclosed an 8.8% stake and expressed their concerns over the company's lack of definitive plans to return capital to shareholders and its apparent complacency on cost controls. Tom Sandell, the CEO and Senior Portfolio Manager of Sandell summarized the hedge funds stance best, stating, "We believe that InfoSpace shares are materially undervalued and the board and management should take immediate steps to improve that value. If the company and the board are unable or unwilling to take these steps, we think the company should be sold. As the company's largest shareholder, our interests are directly aligned with the rest of the shareholder base in seeing value maximized and we may seek representation on the board to protect those interests." Specifically, the hedge fund seems most concerned that the company's actions have obscured the profitability and cash flow strength from the company's search/directories segment and impaired the value of the company's largest asset - a NOL (net operating loss) carry-forward topping $1 billion.

Sandell insists that the company is undervalued due to several factors:

1. Cash - The market is not giving full value to the company's $12/share in cash due to fears that management may waste the cash on a dilutive acquisition to replace the growth engine lost at the mobile business. Sandell noted that they were encouraged, however, by the company's statements that the company intends to do no such thing.
2. Net Operating Loss Carry-Forwards (NOLs) - These are assets that are frequently missed by investors in many companies - they are losses from past years that can be carried over to offset income taxes in future tax periods. The share price of INSP reflects virtually no value to the more than $1 billion in NOLs. Sandell attributed this to the fact that many investors are uncertain as to whether the company will be run for profitability or growth. With its current revenue and asset mix, management's lowest risk strategy would be to focus on maximizing profitability and selectively adding profitable cash flowing businesses that compliment the search/directories business. However, without an unrelenting focus on costs, this asset will be almost worthless.
3. Online - Sandell said that it believes that the true value of the online segment is being clouded by the confusing segment reporting and excessive corporate costs, which mask the true earnings power of this business. Moreover, concerns over growth prospects after last quarter's revenue declines likely added to this fact. The hedge fund insists that with better segment disclosure and a return to positive top line growth should result in at least a 40% EBITDA margin if it were run at optimal efficiency.
4. Mobile - Sandell insists that the stock price implies that investors are assigning zero value to this business even though there is still a stable core business outside of the affected content/ringtone business. Further, they believe that this segment should be a very attractive acquisition candidate due to its strategic positioning with the major mobile carriers and believe that InfoSpace should investigate the possibility of divesting this business.
   

So, what exactly does the hedge fund suggest? Well, they outlined two key elements in their letter to the company's Board of Directors:

1. Reduce expenses by at least $15 million through the end of 2007, which should add up to $5 of incremental value to the stock. While the company is currently working on cost cutting in its mobile division, the hedge fund said it would like to see this applied to the entire enterprise. Specifically, many of the expenses present in these areas are likely legacy expenses inherited from a time when INSP was a much larger company.
   
2. Buy back $200 million of its common stock through a Dutch tender offer at a premium to the current market price along with a $100 million special dividend. Sandell believes that these actions would not have any negative impact on the company's ability to utilize their NOLs going forward. Moreover, they believe that the two actions would send a very positive signal to the market that the company feels the problems of the past year are behind it and that management and the board are focused on enhancing shareholder value.

Clearly, Sandell makes a compelling argument for taking action to unlock shareholder value. They estimate that the company could be worth around $35 per share in the event of a simply restructuring and up to $41 per share in the event of a breakup. Sandell also stated that if the company did not heed these changes, they should hire an investment banker to pursue other strategic alternatives, which could include a possible sale of the company's various divisions. Combined, these factors definitely make INSP a stock worth watching closely!

Related Companies
Google Inc. (GOOG)
Yahoo! Inc. (YHOO)
Microsoft Corporation (MSFT)

Ceridian Corporation (NYSE:CEN) shares moved down $1.01, or 3.07%, to $31.86 after the company's Chief Financial Officer, Douglas Neve, resigned and Gregory Macfarlane was appointed to take his spot. Further compounding this loss was Pershing Square's press release in which they expressed concerns about the company's new CFO and the board's failure to retain key management personnel. The news comes amidst a proxy contest currently taking place between the company and Pershing Square and a recent lawsuit filed by the hedge fund seeking the release of certain letters related to communications between the company's board and management.

What problems did Pershing Square find with this CFO replacement? Well, the hedge fund first highlighted Mr. Neve's career in which he has been widely credited with re-staffing and rebuilding the company's finance and accounting organization, restoring investor confidence in the company's financial statements (after an SEC investigation and five restatements!), and driving Ceridian's HRS division margin improvement program. Clearly, he is a man that will be missed by analysts and investors. Then Pershing questioned the appointment of a division-level finance executive as CFO - someone who lacks experience with public companies. They questioned how the company concluded that this was the right hire at the right time. Moreover, they question why the board remains not only unconcerned about the departure of several high-profile executives but also the recent influx of former GE employees who have little experience in the markets in which Ceridian operates.

Clearly, there is reason for concern when several important executives leave the company. Pershing concluded their statement by saying that the board of directors should act with appropriate care regarding long-term employment commitments they extend throughout the company's senior ranks. If the hedge fund is successful in their proxy contest, we can be sure that greater care will be taken to retain key personnel necessary to orchestrate a turnaround and spin-off. Whether or not they are successful in their proxy contest remains to be seen, but for now, this is definitely a great stock to watch!

Related Companies
Paychex, Inc. (PAYX)
Automatic Data Processing (ADP)
TALX Corporation (TALX)

The Pogo Producing Company (NYSE:PPP) said today that it agreed to add two members to its Board of Directors from Third Point LLC, effective immediately, expanding the Board's size to ten members from eight. In return, the activist hedge fund agreed not to solicit proxies in Pogo's 2007 annual meeting or take certain other hostile shareholder actions. The news comes after many investors, including Third Point and Third Avenue Management, had expressed concerns about the company's valuation and management's inability to unlock value. The hedge fund had encouraged the company to sell the company in whole or part in the past, threatening a proxy fight if the company didn't heed its demands.

So, what does all of this mean? Well, according to the company's press release, Pogo and its financial advisors, Goldman, Sachs & Co. and TD Securities Inc., are actively exploring strategic alternatives, including the sale or merger of Pogo. In addition, the company said it will continue to simultaneously pursue the potential sale of significant assets including its Canadian, Gulf of Mexico or other properties. Knowing Daniel Loeb's past successes, we can be sure that something will be done to unlock value. These factors make PPP a stock worth watching even more closely during the next couple of months!

Related Companies
Apache Corporation (APA)
EOG Resources, Inc. (EOG)
Forest Oil Corporation (FST)

U.S. health regulators have approved GlaxoSmithKline's (NYSE:GSK) pill, Tykerb, for patients with advanced breast cancer after other treatments have failed, the company said on Tuesday. Glaxo shares recovered earlier losses after the late afternoon news and closed down $0.75 at $55.25 on the NYSE.

Qualcomm (NDAQ:QCOM) raised its forecast for fiscal Q2 earnings and revenue, citing stronger-than-expected worldwide demand for products based on its CDMA mobile phone technology. Shares rose 3% on the news, which followed an update from bigger rival Texas Instruments the night before. TI narrowed its forecast range for the quarter but kept the midpoint steady. Wireless chip and technology license supplier Qualcomm forecast quarterly earnings of $0.48 to $0.49 a shar, compared with its previous estimate of $0.42 to $0.44 a share. It raised its revenue outlook for the quarter ending April 1 to $2.1 billion to $2.2 billion, up from its previous estimate of $2 billion to $2.1 billion.

Billionaire investor Carl Icahn said on Tuesday that he would launch a tender offer for home builder WCI Communities (NYSE:WCI) in which he has about a 14.6% stake, at $22 per share. He said he would ensure the assets are properly managed through the current housing industry downturn. Icahn has agitated for change at many companies and is currently also seeking board seats at Motorola and Temple-Inland. Shares of WCI soared nearly 15%.  

Real estate investment trust Spirit Finance (NYSE:SFC) said has accepted a takeover bid from a consortium led by Macquarie Bank for approximately $1.6 billion in cash, or $14.50 per share. The purchase price represents an 11% premium over Spirit's closing price of $13.05 on the NYSE Monday and a 15% premium over its 90-day average closing price. Including about $1.9 billion in assumed debt, the deal is valued at $3.5 billion. In addition, the consortium agreed to buy about 6.15 million shares of Spirit common stock at $12.99 each, or $79.9 million. Spirit will use proceeds from the private placement to fund real estate-related activities.

Goldman Sachs Group Inc. (NYSE:GS), the largest Wall Street investment house, on said  its Q1 profit rose 29% to a company record on robust trading gains and investment banking fees. New York-based Goldman reported earnings applicable to common shareholders rose to $3.15 billion, or $6.67 per share, for the quarter ended Feb. 23, compared to $2.45 billion, or $5.08 per share, in the year-ago period. Revenue rose 22% to $12.73 billion from $10.43 billion in the year-ago period. Results surpassed Wall Street projections for earnings of $4.97 per share on $10.69 billion in revenue, according to analysts polled by Thomson Financial. However, Goldman's shares fell $3.52, or 1.8%, to close at $199.08 on the NYSE, which was in line with a selloff in the broader market.

Oil prices fell Tuesday to settle under $58 a barrel, as a decline in the stock market stirred worries about the economy and demand for energy.

Embarcadero Technologies Inc. (NDAQ:EMBT) shares moved up $0.09, or 1.37%, to $6.66 after Chapman Capital issued a press release reiterating its demand that Embarcardero's Board of Directors maximize shareholder value via a change-of-control transaction. The activist hedge fund, which owns a 9.3% stake in the company, also said that it would seek nominees to replace several Class I and II directors.

The company first attracted buyout interest back in September 2006, when it announced it had entered into a definitive agreement to be acquired by an affiliate of the Thoma Cressey Equity Partners in a cash transaction valued at $8.38 per share of common stock. Problems arose in November, however, when the company failed to file on time and eventually uncovered an options backdating problem. This caused Thoma Cressey to terminate their merger agreement on December 18th. Chapman Capital then decided to take an active stance in the company again and began contacting shareholders. By February 28, 2007, Chapman Capital’s research led to the conclusion that there was virtually unanimous sentiment amongst the company's shareholders that the most suitable strategic course of action for the Issuer was to resume the auction process conducted by Morgan Stanley & Co., as compared to the arguably higher risk spend-for-growth strategy that has crippled numerous sub-$100 million technology companies in the past. Particularly in light of the company's February 16, 2007, disclosure regarding the company's ongoing NASDAQ delisting risk, declining license revenue, and option-scandal related inability to announce full earnings results for the fourth quarter ended December 31, 2006, the company's ownership base conveyed a uniform desire for the company's common stock value to be maximized through a change-of-control transaction. 

"Embarcadero's Board of Directors is virtually ownership-free, with only one director recently possessing a mere $65,000 in Embarcadero shares vs. funds advised by Chapman Capital owning over $15 million of this $170 million-in- market-capitalization company. The Board, with no meaningful 'skin in the game,' shall not be allowed to 'play venture capitalist' with the hard-earned money of a shareholder base held hostage by weak corporate governance," said Mr. Chapman. "Morgan Stanley & Co., the financial adviser still retained by the Board, is in possession of a signed merger agreement and germane fairness opinion that with minor modification could be applied expeditiously to a revised merger proposal. In a period of record merger and acquisition activity driven by a multitude of cash-flush financial and strategic buyers, Morgan Stanley shall not be exculpated for failure by using the pretext of a shareholder base that is openly willing to sell."

Combined, these factors make EMBT a stock worth watching! If Chapman Capital is able to convince the company to put itself up for sale, it could mean significant share appreciation for investors. Typically, when threats of a proxy fight are issued, the company will at least respond to the demands in an attempt to prevent the costly process from occurring. So, the next thing to look for is either a communication from the company or a DEF14A proxy solicitation.

Related Companies
Quest Software, Inc. (QSFT)
Borland Software Corp. (BORL)
Informatica Corporation (INFA)

Ceridian Corporation (NYSE:CEN) shares moved up $0.57, or 1.79%, to $32.38 today after the company appointed a new Chief Financial Officer. It was also revealed late Friday in a DEF14A filing that the company was being sued by activist hedge fund Pershing Square. In the lawsuit, the hedge fund demanded that the company make two letters available for inspection and copying by the hedge fund. Ceridian had admitted the existence of these two letters which were sent by senior executives of the company to the company's board of directors. Pershing Square believes that these letters include discussions of the senior executives' concerns about the management of the company, including concerns about the board of directors' oversight responsibilities and/or the performance of the prior chief executive officer. Yet, Ceridian has refused to provide the hedge fund with access to those letters for potential use in a proxy contest, even though they are directly relevant to the question of whether shareholders should vote for the new nominees proposed by Pershing Square or those proposed by the incubant directors. What did the company have to say? According to a spokeswoman for Ceridian: "We believe this lawsuit is completely without merit and we intend to defend ourselves vigorously."

Meanwhile, the company announced the appointment of a new chief financial officer today. "We are extremely pleased to have someone of Greg's caliber joining Ceridian," said Kathryn V. Marinello, president and chief executive officer of Ceridian. "Greg demonstrated his financial expertise during his years at GE by continually improving the business units in which he worked. I worked with Greg closely in the past at GE's Partnership Marketing Group and was consistently impressed by his knowledge of finance and leadership capabilities. The Board and I are delighted to welcome Greg to our senior management team and are confident that he will be an important contributor to Ceridian's success as we focus on creating value for our shareholders." The new CFO is good news for shareholders, who will also be watching this court fight closely to see if they can get a better glimpse into the company's management team and board of directors. And in the end, if Bill Ackman's Pershing Square is able to take over the company's Board of Directors, it could mean significant upside for shareholders! This makes CEN a company worth watching!

Related Companies
Paychex, Inc. (PAYX)
Automatic Data Processing (ADP)
TALX Corporation (TALX)

UnitedHealth Group (NYSE:UNH) said today that it agreed to acquire Sierra Health Services, Inc. (NYSE:SIE) for approximately $2.6 billion, giving the health insurer a larger marketshare in the quickly expanding Southwest region and boosting its senior health-care capabilities. Sierra shares rose over 15% on the news, while UnitedHealth shares moved up fractionally.

Boston Scientific Corp. (NYSE:BSX) said its Board of Directors has authorized management to explore an initial public offering of a minority stake in its endosurgery group. The medical device maker said an IPO would involve selling approximately 20% of the endosurgery group, which would remain a majority owned subsidiary.

Wireless Facilities Inc. (NDAQ:WFII) said it plans to delay its 2006 annual report as it continues to investigate possible options backdating. The company is expected to record a $9.2 million charge related to the accelerated vesting of all of its employee stock options, an $18.3 million goodwill impairment charge, and a $3.4 million asset impairment charge.

Several changes were announced to the S&P500 index. Host Hotels and Resorts (HST) will be added to the index on a date to be determined, replacing Phelps Dodge Corp. (PD), which is being acquired by Freeport-MyMoRan Copper & Gold Inc. (FCX). Also, the S&P said it would be adding Option Care Inc. (OPTN) to the SmallCap 600 index after the close of trading March 15th. This company will replace Hancock Fabrics, inc. (HKF).

Cosi Inc. (COSI) said that its Chief Executive Kevin Armstrong has resigned for health reasons. The company named Robert Merritt, one of its directors, as interim CEO, effective immediately.

Netease Com Inc. (NDAQ:NTSE) said that its Board of Directors OK'ed a new buyback program that would enable the company to repurchase up to $100 million ADRs.

Merck & Co., Inc. (NYSE:MRK) said that it plans to appeal the Humeston Vioxx verdict, where a N.J. jury awarded $20 million to plaintiffs.

Texas Instruments Incorporated (NYSE:TXN) said that its inventory correction was "winding down" while its customer inventory levels were improving. Consequently, the company expects growth to resume again in Q2.