FSI International, Inc. (NDAQ:FSII) shares have moved up over 7% since late last week when Chapman Capital disclosed a 6.5% stake in the company and expressed his increasing concern over the apparent divergence between ownership and management of the company in a Schedule 13D filing with the SEC. Specifically, Mr. Chapman was appalled that in approximately 75% of the fiscal quarters comprising FY2000 through FY2006 the company had reported net losses while CEO Benno Mitchell received millions of dollars in compensation. The hedge fund manager was also concerned by the fact that the CEO ran the company from the comfort of his own home. This concern was heightened when Mr. Mitchell's wife answered the telephone at Mr. Mitchell's primary place of conducting business! Since then, no telephone calls have been returned as the company continues to avoid contact with its shareholders. Consequently, the hedge fund said that they plan to solicit interest in acquiring the company by prospective strategic buyers and plan the recruitment of alternative management and corporate governors for the company. If there is significant interest in the company by other players in the semi-conductor industry, FSII shareholders could see significant upside as cost cutting could greatly enhance the profitability of this company. This makes FSII a stock worth watching!

Related Companies
Semitool, Inc. (SMTL)
Lam Research Corporation (LRCX)
Asyst Technologies, Inc. (ASYT)

Tribune Company (NYSE:TRB) shares moved up 2.65% today after the it agreed to Sam Zell's $8 billion buyout offer, making the end of a six month auction process. Under the terms of the deal, Zell will investment $315 million in equity, which will be largely held through an employee stock ownership plan or ESOP. Meanwhile, Zell will retain a subordinated note and a warrant enabling him to acquire 40% of Tribune's common stock. The company also agreed to sell the Chicago Cubs and 25% of its Comcast SportsNet Chicago interests to pay down debt after the 2007 baseball season. Tribune's chairman, president and CEO Dennis FitzSimons said, "As a private company, Tribune will have greater flexibility to transform our publishing/interactive and broadcasting businesses with an eye toward long-term growth."

How is this entire deal going down? Well, first there will be a cash tender offer for around 126 million shares at $34 per share, funded through loans and a $250 million investment from Zell. This initial tender offer is expected to be completed by June. Then the company will implement a merger agreement in which Tribune and the ESOP will merge and all remaining Tribune stock will be converted to cash at $34 per share. The entire process is expected to close in the fourth quarter of this year, marking an end to the lengthy and heated Tribune auction process.

Related Companies
Washington Post Co. (WPO)
Gannett Co., Inc. (GCI)
CBS Corporation (CBS)

The Brink's Company (NYSE:BCO) is again under pressure from dissident shareholders to unlock value through a strategic transaction. MMI Investments disclosed an 8.3% stake in the company today and recommended that the company pursue a tax-free spin-off of one of BCO's two business segments to create value for shareholders. MMI, along with other shareholders, believe that Wall Street has perpetually undervalued the combined enterprise despite all the changes of the past few years, BCO's premier brands, and its best in class operating model in both monitoring and cash-in-transit. Based on a sum-of-the-parts analysis, MMI believes that the potential value to be created via a tax-free spin-off could mean a $79 per share valuation - a 25% premium to the current stock price.

MMI Investments believes that a spin-off is the best option since the move would align the company with the increasingly specialized comparables universe (ie. Securitas Direct, Protection One, Loomis, Tyco) and enable the company to retain tax-free treatment without inhibiting other value-enhancing options. The hedge fund also believes there are several business reasons for the spin-off, including;

• BHS and Brink's have different cash flow and capital investment requirements
• Both entities would benefit from separate access to equity and debt capital markets
• Potential for a higher valued equity currency to compete in the highly competitive M&A market
• Management of each entity would have the opportunity to focus exclusively on their distinct businesses
• Employees could be incentivized through stronger equity compensation plans more closely aligned to the performance of their business

Indeed, the company's 10K already suggests that BHS and Brink's Inc. are two separate subsidiaries, while the two entities do not even share facilities in any significant way. Moreover, if the spin-off were to take place, the two resulting companies would both have market capitalizations of approximately $1.5 billion or greater - more than enough for public company critical mass. So in the end, there is little reason not to pursue such a strategic transaction, as it would greatly enhance shareholder value and provide the company with greater flexibility. Combined, this situation makes BCO a stock worth watching!

Related Companies
EGL, Inc. (EAGL)
Kitty Hawk, Inc. (KHK)
Protection One, Inc. (PONN)

Credit card transaction processor First Data Corp. (NYSE:FDC) said that it is being acquired by an affiliate of private equity firm Kohlberg Kravis Roberts & Co. for about $27 billion, which would be among the richest ever private takeover offers in the U.S. The proposed deal comes amid a flurry of activity by buyout groups to take public companies private. KKR has offered $34 a share for First Data, a premium of about 26% over First Data's closing price last Friday.  First Data shares rose $5.55, or 21%, to close at $32.45 Monday on the NYSE after briefly rising to a 52-week high of $32.90. It has about 754 million common shares outstanding which would be worth $25.6 billion at the offered price. In addition, the company said unvested stock options and restricted stock awards that would vest upon a takeover would add about $1.4 billion to what the buyer would pay for First Data stock, boosting the deal's value to about $27 billion.

Real estate mogul Sam Zell won the battle of the billionaires Monday, landing media conglomerate Tribune Co. (NYSE:TRB) after a down-to-the-wire bidding war. Even with the buyout's $8.2 billion price tag, the outlook for the nation's second-largest newspaper publisher remained as uncertain as it did six months ago when it began a strategic review to boost a lagging stock price. A big chunk of new debt also will be required to pay the $34 a share cash buyout. Zell is counting on repaying the debt largely through tax benefits from a new employee stock option plan that would supplement existing retirement accounts for the company's 20,000 workers. Aside from selling the Chicago Cubs baseball team and its stake in Comcast SportsNet, Zell and Tribune executives were mum about prospects for the rest of the company's assets, including 23 television stations and nine newspapers ranging in size from the Los Angeles Times and the Chicago Tribune to the Daily Press in Newport News, Va. that will remain after two papers in Connecticut are sold. The buyout will be conducted as a two-part deal, the company said. The first stage, expected to be completed in the second quarter, will involve a cash tender offer of $34 per share for 126 million shares, more than half of the outstanding Tribune shares. The remaining shares will be purchased later at the same $34 per share price. Tribune has about 240 million shares outstanding, according to a regulatory filing.

New Century Financial Corp. (OTC:NEWC), once the nation's second-largest provider of home loans to high-risk borrowers, filed for bankruptcy protection on Monday, the victim of its own financial missteps as well as pressures felt by its rival lenders. New Century immediately fired 3,200 workers, more than half of its work force, and said it intends to sell off its major assets.

Citibank, the retail banking arm of Citigroup Inc. (NYSE:C), said Monday it's starting a mobile banking service that customers can download to their cell phones. The service, Citi Mobile, will be introduced first in Southern California and should be available throughout the United States by midyear, bank executives told a news conference in New York. Citi joins other U.S. financial institutions that are rolling out wireless banking applications. New York-based Citigroup, the nation's largest financial institution, sees the new service as yet another channel for customers to use for their banking, beyond the Internet bank Citibank Online, automated teller machines and the Citi call center operations.

M&T Bank Corp’s (NYSE:MTB) stock dropped 8.5%, or $9.88, to $105.95, after it said late on Friday that problems in mortgages with limited income documentation would hurt results.

Sun Microsystems (NDAQ:SUNW) shares declined 3.5%, or $0.21, to $5.80 after Sanford C. Bernstein lowered its rating on the company's stock, saying fiscal Q3 results could be disappointing.

US phone company AT&T Inc. (NYSE:T) said it and Mexican cell phone operator America Movil were in talks to buy stakes in the company that controls Telecom Italia for about $6.4 billion. AT&T shares ended up $0.03 at $39.46.

Starwood Hotels & Resorts Worldwide Inc. (NYSE:HOT) rose $2.97, or 4.6%, to $67.82, after announcing Steven J. Heyer has resigned as chief executive and a director after the company's board lost confidence in his leadership. The company also reaffirmed its first-quarter and full-year guidance.

Apple Inc. (NDAQ:AAPL) shares rose $0.74 to $93.65 after it reached an agreement with EMI Group PLC to sell the record label's songs online without copy protection software. However, the deal did not include The Beatles catalog.

Automatic Data Processing (NYSE:ADP) announced late Friday that it has completed the spin-off of its brokerage services group via a tax-free distribution to its shareholders. ADP said its shareholders would receive one share of the new Broadridge stock for every four shares of ADP stock that they own. The new stock will trade on the NYSE under the symbol "BR" beginning on Monday.

Atria Group (NYSE:MO) announced that it had completed its spin-off of Kraft Foods Inc. (NYSE:KFT) to Altria's sahreholders. The distribution of Altria's 88% stake was made on Friday to shareholders on record as of March 16th. Altria shareholders received 0.69 shares of Kraft for every share of Altria common stock held.

M&T Bank Corp. (NYSE:MTB) said trouble in its subprime residential mortgage unit will reduce its first-quarter net income to $1.50 to $1.60 a share compared to an original estimate of $1.86 per share. First-quarter profits will be cut by $7 million, or 7 cents per share, as a result of a $12 million reduction in the carrying value of M&T's socalled Alt-A mortgage portfolio held for sale.

Interpublic Group of Cos. (NYSE:IPG) said it has been informed by Johnson and Johnson of its decisiont o review media planning and buying. Interpublic is one of J&J's media agencies and one of its larger clients.

Potlatch Corp (NYSE:PCH) said it has agreed to sell its 17,0000 acre hybrid poplar tree farm in Boardma, Ore., to a private-equity tree-farm investment fund for $65 million. The deal is expected to close in the second quarter of 2007. The company said that it expects to incur an after-tax book loss of roughly $33.5 million on the sale, which will be recorded in the first quarter of the year.

Walter Industries (NYSE:WLT) was featured positively in Barron's Online. The article stated that while results and earnings may be volatile, the company's free cash, expansion plans, and dividend should keep the fire alive for shareholders.

Dendreon (NDAQ:DNDN) shares more than doubled in value by Friday's close after a FDA advisory committee concluded that the company's novel, experimental prostate cancer drug Provenge was both safe and effective. Given the results, many analysts raised their price targets for the company to around $20 per share. Meanwhile, the stock currently trades at $12.93.

Beazer Homes USA (NYSE:BZH) said on Friday that it would review two lawsuits filed against the homequilder, one of which accuses the company of using practices that allowed unqualified borrowers to get loans to buy its homes, but said it believes both were without merit.

Cephalon (NDAQ:CEPH) said on Friday that US regulators were willing to approve the company's experimental new drug Nuvigil for exxcessive sleepiness, but will require the company to carry prominent warnings of a skin-rash danger.

eSpeed Inc. (NDAQ:ESPD) shares moved up $0.19, or 2.07%, to $9.38 after WC Capital disclosed a 6.4% in the company and expressed their concerns about the company's valuation. The activist hedge fund said that their analysis has led them to believe that the range of the company theoretical valuation could be considerably higher than the current share price, which could result in a value 28% to 70% greater ($12 to $16 per share) than the current valuation of $9.40 per share. The move comes after another large shareholder, Chapman Capital, disclosed a 9.3% stake and made similar demands that the company immediately put itself up for sale. The problem facing both shareholders is the fact that 88% of the company's voting power is controlled by Mr. Lutnick and his affiliates due to a classified share structure in which Class B shares have 10 votes each.

Problems began in early 2004 when several investors began to recognize a significant divergence between the performance of the company's common stock and its publicly traded peers. Specifically, in 2004 the company stock plummeted 47% while that of its peers remained flat, and in 2005 the company's stock dropped 37% while its peers added 49%. Then in January of 2006 there was a glimmer of hope when The Daily Telegraph reported that Cantor Fitzgerald was preparing a stock market float of BGC Partners, its London-based brokerage business, in a move that was expected to lead to a merger with eSpeed, the Nasdaq-quoted broker also controlled by Cantor, to create a company worth between $500 million and $1 billion. However, this deal never materialized. Then, in a highly questionable December 2006 Form 4 filing with the SEC, Mr. Lutnick was granted, free of cost, 800,000 Class A common stock options - representing 3% of the company's outstanding shares! This upset many investors who feared the potential dilutive effects of the options. Finally, the last straw came in February of this year when the company issued a press release that disclosed its FY2007 financial outlook. Investors were outraged to find out that company projected nearly break-even operating performance due to approximately $152 million of non-GAAP operating revenues being consumed by $146 to $148 million of non-GAAP operating expenses, a level of spending which investors have thought unacceptable.

Now, WC has suggested that the board of directors immediately review several strategic alternatives for the company:

1. Sale of the company
2. Conversion of Class B shares to Class A shares
3. Return of capital to shareholders (one-time dividend/share repurchases)
4. Initiation of procedures and structures increasing eSpeed autonomy

Clearly there are changes that need to be made to this company and with two shareholders now expressing concerns, maybe the company will institute some changes. Regardless, this is definitely a stock worth watching!

Related Companies
Global Payments Inc. (GPN)
Fidelity National Information Services (FIS)
MoneyGram International Inc. (MGI)

Tower Automotive Inc. (OTC:TWRAQ) received a $1 billion buyout offer from Cerberus Capital Management to take it out of Chapter 11 bankruptcy protection. The company would be the latest in a series of automotive takeovers by private equity, which have included Delphi and DaimlerChrysler. The term sheet submitted to the U.S. Bankruptcy Court indicated that the Cerberus offer would pay off all of the outstanding obligations to debtors, pay off Tower's pensions, and provide "certain recovery" for unsecured creditors. These unsecured creditors would get $10 million in cash under a reorganization plan while Cerberus would put aside another $2 million in a liquidating trust for the unsecured creditors. The process would also allow for competitive bids; however, the bidding procedures would be $10 million above Cerberus' initial offer and will raise in $5 million increments, which is somewhat high for a bankruptcy auction. Consequently, it is likely that the Cerberus offer will be the final offer, especially considering the fact that many of the other large private equity firms that would compete have already taken stakes in other automotive companies.

Meanwhile, the company's common stock shareholders pushed the OTC shares up nearly 100% on the news until it settled at $0.06. It is uncertain as to whether or not common stock shareholders will be able to partake in the $10 million set aside for unsecured creditors. Remember, unsecured creditors include not only common stock shareholders but also preferred stock shareholders, trade creditors, and many others. Currently, the OTC shares price the company's common stock value at $3.92 million, indicating an assumption that almost 40% of the $10 million payout will be distributed to common stock shareholders. Will this happen? While nothing is certain, it is unlikely that this much will be set aside since there are many other unsecured creditors that must be paid off. Regardless, this development is certainly worth following as private equity continues to aggressively take over the auto sector.

Related Companies
Productivity Technologies Corp. (PRAC)

Electro Scientific Industries Inc. (NDAQ:ESIO) shares moved up $0.49, or 2.58%, to $19.51 today after Nierenberg Investment Management disclosed an 11.7% stake in the company and expressed their impacience with ESIO as its share price weakens. The activist hedge fund contends that the company continues to depress its return on equity (ROE) by failing to make its excess cash work harder and smarter for its shareholders. Nierenberg has communicated these concerns with the company in the past along with Third Avenue Management - another activist hedge fund pushing for changes. However, despite these communications, little seems to be changing despite the company's January 22nd press release affirming their commitment to shareholder value. Consequently, Nierenberg made an ultimatum saying that time is running out and the time for action is now. If management does not make some immediate changes, it is likely that Nierenberg will pursue board seats in what could become a proxy fight for contorl of the company. Given their large stake and support by Third Avenue Management and other shareholders, it is likely that they would succeed in such a battle.

Just how much cash is ESIO carrying? Well, in addition to to its cash reported on the cash and marketable securities lines of the balance sheet, they also have $1 million from an insurance settlement and $7 million in a litigation bond in Taiwan, which increases cash per shares to $7.73. If ESIO were to restore inventories and receivables to June 3, 2006 levels, and if the above-mentioned $8 million in cash were added, ESIO's total cash and marketable securities would be $8.21 per share - or over 40% of ESIO's share price! ESIO is profitable, cash flow positive, and debt-free... so why has it dropped through 2006 from $25 per share to $19 per share? This is the issue that the hedge funds are trying to address.

What measures is Nierenberg looking for to unlock value? Well, the hedge fund advocates a "tangible and substantial" boost to ROE via a (at minimum) six million shares repurchase with a plan in place to repurchase at least one million more shares annual from free cash flow, asset monetization, and cash reserves. Nierenberg said in a past filing that given the combination of organic growth, increased R&D investment, a number of promising new product releases, and possible acquisitions could enable ESIO to double its revenues over the next three to four years. Management has shared this goal with the public on sevearl occasions. Moreover, given the company's business model, such growth would drive earnings per share north of $2.00, and, in their view, ESIO's share price to $40, more than double its currently depressed level. This makes ESIO a stock worth watching!

Related Companies
GSI Group, Inc. (GSIG)
CyberOptics Corporation (CYBE)
Cognex Corporation (CGNX)

Online advertising firm DoubleClick Inc. is reportedly exploring a sale and is already in talks with Microsoft Corporation (NDAQ:MSFT) among others. The firm hired Morgan Stanley to help it explore strategic alternatives, including a possible sale or initial public offering. The company is majority owned by private equity firm Hellman & Friedman who purchased the business in 2005 for approximately $1.1 billion. The hedge fund hopes to get at least $2 billion for the company as potential bidders including Microsoft, IAC/Interactive Corp, and others. The acquisition could help Microsoft boost its edge in the competitive online advertising market dominated by Google's (NDAQ:GOOG) Adsense and Adwords programs and Yahoo!'s (NDAQ:YHOO) Overture. And with Microsoft's vast amounts of cash onhand, it could represent a new threat to Google's dominance in the online advertising market. This makes the situation one worth watching!

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

The Blackstone Group recently announced its intentions to go public in what is quickly becoming a private equity rush to the public markets. Blackstone, the largest private equity firm in the world, is planning to offer 10% of its shares to the public for $4 billion in a move that is sure to spark interest on Wall Street. Many investors like the idea of a Blackstone IPO since the company has proven to be a cash machine. Since 1987 the firm has averaged an impressive 23% annualized return with its real estate division returning closer to 29%! Meanwhile, Blackstone's assets have grown from $14 billion to $78 billion in less than six years - that is, they have multiplied their assets more than five times in six years. These are impressive numbers that have many investors eager to put money in the private equity giant.

Some investors are speculating that this move indicates that the market may be overvalued. After all, if the market wouldn't assign a high enough premium to their shares why would they IPO? What concerns investors is the ease in which private equity and hedge funds are able to raise cash. Investors who know the market is fully valued are apparently willing to give their money to these firms that in turn feed the M&A mania. Moreover, is there a problem with the credit markets? The recent subprime fiasco combined with the fact that the credit markets have grown five times as fast as the GDP for the entire 21st century so far is certainly cause for hesitation. And what happens when the debt markets grow less desirable and equity is required to get deals done? It's simple, returns will fall. This makes the idea of investing in Blackstone less desirable. However, at least in the short-term, we can be sure that there will be plenty of interest in the IPO. Whether this is a sign of something more remains to be seen. Combined, these factors make Blackstone a company worth watching!