Arrow International (NDAQ:ARRO) shares jumped $5.98, or 18.21%, to $38.82 today after the company announced that it formed a special committee to explore strategic alternatives. The company hired investment banking firm Lazard Freres & Co. to assist them in connection with the review.

Interestingly, Richard Niner, who resigned from the company's board on May 4th, commented, "For the last several months the board, in fits and starts and in a clandestine manner led by its four founders, has been pursuing a sale strategy for the company. The strategy, I believe, is being pursued at the wrong time, for the wrong reasons and in the wrong way."

The comments gave merit to speculation that the company was considering putting itself up for sale as opposed to exploring other internal strategic options. Given the apparent support by the board of directors and shareholders (evidenced by today's spike) it's safe to say that a sale is a strong possibility provided there are willing buyers. The high buyout premiums we've been seeing recently are also very attractive for opportunistic investors.

Arrow said it does not plan on providing updates or making further comment until the outcome of the process is determined or until there are significant developments. Moreover, the company has set no timetable or guarantee that the company will pursue any strategic options.

Despite Niners objections to the company putting itself up for sale, this is clearly the direction in which the board is heading. This makes ARRO a stock worth watching!

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Alltel Corporation (NYSE:AT) shares moved up $1.29, or 1.98%, to $66.49 today after a Wall Street Journal report added to long-standing rumors that the company could be a buyout target by Verizon, Spint-Nextel or several private equity buyout firms. The report marks the second time the WSJ reported that private equity was circling the company - the first was back in December of this year. Now, the newspaper insists that the firms are closing in on a deal.

The company has more than 12 million subscribers, which makes it the fifth largest mobile phone provider. The company also consistently ranks higher on consumer evaluation polls and has outpaced its competitors when it comes to rolling out new features and services. The company also has many roaming agreements with several other large carriers, which is a great bargaining chip for any potential suitors. Finally, given the company's low debt and strong balance sheet, a substantial amount of debt could be used in the event of a leveraged buyout.

The WSJ noted that three separate groups of private equity buyers have been formed to evaluate a takeover of Alltel. The groups are: Blackstone Group and Providence Equity Partners; TPG Capital and Goldman Sachs; and Carlyle Group and KKR. Many analysts believe that the private equity firms were simply interested in holding and operating the company until a mobile phone carrier appeared ready to bid for the company. This makes AT a company worth watching!

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Griffon Corporation (NYSE:GFF) may face more pressure from dissident shareholders after the Clinton Group (CGI) and its affiliates disclosed an 8.3% stake in the company and disclosed a letter to the board of directors. The activist hedge fund expressed disappointment over the extent of the company's decline in earnings and its inability to responsively adjust cost structures, which total more than $20 million annually.

CGI believes that the company's "mini-conglomerate" corporate structure where management ostensibly oversees three unrelated businesses for huge renumeration is simply unacceptable. While the company did retain Goldman Sachs to explore strategic alternatives, the hedge fund suggested that it be mandated to narrow these to either a sale of the company in whole or in parts or a public recapitalization aided by a qualified financial sponsor. The hedge fund believes this is the best way to unlock value for shareholder amid a string of un-kept promises and out-of-control costs.

Finally, CGI also noted that the company failed to respond to any of the management issues that were brought up in its previous letters to the company - particularly, the devices in place to entrench management and the board. The hedge fund threatened to conduct a proxy fight to replace board members if the company failed to address these issues soon. Combined, these factors make GFF a stock worth watching!

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Movie Gallery (NDAQ:MOVI) shares moved up $0.33, or 9.82%, to $3.69 today after Schultze Asset Management disclosed a 14.4% stake in the company and requested a meeting with the board to propose a number of possible shareholder value-enhancing steps.

The hedge fund suggested that the steps could include a shareholder rights offering to raise funds from existing shareholders in an effort to reduce bank and/or bond debt so that future interest expense may be lowered and/or to raise cash for generate corporate purposes.

Rights offerings are somewhat uncommon type of securities offering. They entail the company offering shareholders the right but not obligation to buy newly issued shares in the firm. Sometimes a company's management or shareholders will try to institute a rights offering in order to limit the public knowledge of buying or limit the opportunities for outsiders to enter. Depending on the terms of the offerings, they can be a great opportunity to acquire rights to purchase stock on extremely reasonable terms.

Movie Gallery was facing some trouble last year and is still burdened with substantial debt from its acquisition of Hollywood Video. The stock is up marginally, however, from its 52-week low despite having dropped shoftly after the launch of its new online rental service. The rights offering as well as the potential for more shareholder activism make MOVI a stock worth watching!

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PDL BioPharma (NDAQ:PDLI) shares moved up marginally after Cary Queen announced support for Third Point's proposals for a new direction at PDL in an open letter to the company's board of directors. Daniel Loeb's Third Point first made their proposals back in March of this year and we are still waiting for a response from the company.

Why is this support important? Well, Cary Queen is not only the co-founder of the company, but also inventor of the patents from which PDL derives much of its revenues, a significant shareholder and a senior executive and director of PDL for most of its history. She clearly has a lot of history with the company and a good idea of how they can unlock shareholder value.

Cary Queen insists that PDL's problem is quite clear. The BTK index, which comprises many of PDL's competitors and comparable companies, climbed 43% between 2004 and 2006. Meanwhile, PDL's royalty and license income grew by 250% from $72 million to $249 million. Yet somehow PDL's stock price fell by 15%!

Many dissident shareholders, including Queen, believe that if PDL management had simply let more of the dramatic revenue increase reach the bottom line while focusing on timely development of PDL's own products, the result would have been far better. Instead, management's lack of focus, critical product development delays, out-of-control spending, and ill-advised acquisition of ESP Pharma led to value destruction and shareholder confusion.

The chances of a response from the board of directors greatly increased with the addition of Cary Queen. Many investors are now hoping that Daniel Loeb's confrontational nature combined with Cary Queen's close relationship to the company will be enough of a catalyst for the board of directors to pursue some long-term changes to enhance shareholder value. These factors make PDLI a stock worth watching!

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3Com Corporation (NDAQ:COMS) shares rose $0.24, or 5.7%, to $4.45 after Kenneth Griffin's Citadel LP disclosed an 8.4% stake in the company and expressed his concerns with the company's management team.

The hedge fund manager pointed out in his letter that 3Com's share price has under-performed both relative and absolute measures of shareholder return for many years. More recently, the market's reaction to 3Com's purchase of Huawei Technologies' 49% ownership in H3C has resulted in nearly a 20% decline in share price. Clearly change is needed!

Kenneth believes that many options exist today for the creation of substantial value for 3Com shareholders and insisted that he be able to meet with the management team and board of directors to discuss their corporate strategy going forward. While there was no clear indication of what "options" are being considered to create "substantial" value, many investors are confident that the shareholder will be able to help the company.

Citadel is one of the largest and most successful hedge funds in the world. Its manager, Kenneth Griffin, is a self-made billionaire and extraordinary individual. He founded Citadel in 1990 with just $4.2 million and grew it into the $13.4 billion fund that we know today. The majority of the firms profits come from active trading (its daily trading volume is estimated to amount to 3% of the activity in New York and Tokyo!) but it is carefully moving into more fundamental and activist plays like this one.

Combined, these factors make COMS a stock worth following!

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Wendy's International (NYSE:WEN) shares jumped $2.03, or 5.31%, to $40.26 today after rumors surfaced that a potential bidder for the company has surfaced willing to pay in excess of $50 per share. This comes shortly after the company agreed to explore strategic options amid pressure by activist shareholders.

Billionaire investor Nelson Peltz and famed activist Bill Ackman have both pressured the company to unlock shareholder value through a sale of the company. Wendy's initially complied with the spin off of Tim Hortons in September and the sale of its Baja Fresh chain in November, but the activist investors insisted that this was not enough.

Finally, on April 26th, the company announced that it had created a special committee of directors to consider strategic options, including a possible sale of the company. The move ended a two year campaign by Nelson Peltz's Trian Partners who were successful last year in obtaining three seats on the company's board.

Right now, all of these rumors are unconfirmed. But given Peltz's past success forcing the sale of Baja Fresh and obtaining board seats, perhaps the possibility of a buyout has some merit. Regardless, this is a company that is definitely worth watching!

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Monster Worldwide (NDAQ:MNST) held its gains from a 10% jump last week amid continued buyout speculation. Many journalists and analysts have suggested that the company could be a buyout target for Google, Gannett, Yahoo, or eBay within the next six months. The commonly quoted buyout prices range from the mid-50s to low-60's per share.

The rumors are backed up by strong call option purchases last week combined with an alleged leak of confidential information from a prospective bidder, which reportedly caused the runup. Monster has also been considered an acquisition target for several years as it posted impressive growth numbers with over $1 billion in revenues.

The best suitor is widely considered to be Gannett, who could combine the company with its own CareerBuilder to further solidify its lead in the market. Given the declining margins and reduced subscriptions in the newspaper business, the acquisition would also be a welcome boost to revenues and growth figures.

Meanwhile, Yahoo may be looking for ways to improve upon its revenues, which may slow to below 10% this year. The internet portal already has an impressive online jobs franchise and could quickly become the largest player by purchasing Monster. Despite the large purchase price, Monster's $1 billion in revenues and impressive growth numbers would be a welcome addition for increasingly-discontented Yahoo shareholders.

Of course, nobody can discount Google from the equation as it continues to attempt to diversify its revenues away from purely online search revenues. While the company has no direct synergies, it may be looking to enter the market and is perhaps the best capitalized company to make such a large acquisition.

Currently any Monster acquisition is nothing more than a rumor. However, there is clearly an interest in the company from several large tech players. MNST is definitely a stock to watch in the next year as the situation plays out.

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Glenayre Technologies' (NDAQ:GEMS) management may be in for some serious trouble after activist investor Robert Chapman disclosed a 10% stake in the company and voiced his support for fellow-activist Daniel Loeb, who demanded that the company put itself up for sale last week (read article).

Chapman Capital has been involved with the company for some time now. First, the hedge fund voted to withhold all of its votes in protest against all directors for the company's May 22, 2007 election. Secondly, they are currently suing the company's CEO over an illegal EDC equity option exchange. And now, in a vocal letter to the company, the hedge fund is bringing its fight public while voicing support for fellow-activist Daniel Loeb.

Chapman noted that last week's filing by Third Point was Glenayre's first official warning that its continued siphoning off of value from the company had forced yet another large owner to defend its investment via activist, corporate warfare. It is here that Chapman also said it shares the four stated concerns listed in Item 4, having concluded that what is "clearly best for shareholders" is to "put the company up for sale". He also added, "if by now you have not realized the days of your being paid an annual compensation exceeding $1.8 million for the service of driving Glenayre's owners' collective investment into the ground, it's high time for a reality check."

Chapman also suggested that the company's board of directors read Alan Murray's Revolt In The Boardroom: The New Rules of Power in Corporate America saying, "you may want to take a break from admiring your 2007 Grammy after-party photos to read the entire book, start-to-finish, and then re-read it. Given that Mr. Thomas Costabile, EDC's high paid COO, is carry nearly the entire operational load at EDC, I doubt you lack the free time to read this book cover to cover".

The two activist investors own a combined 17% stake in the company at this time and may increase it before Glenayre's annual meeting. Many investors are hoping that two large, activist investors will be enough to draw a response from management and ideally a move to put the company on the auction block to unlock value. Combined, these factors make GEMS a stock worth watching!

For more background information on Chapman's legal arguments and demands, checkout their Schedule 13D/A filing with the SEC today.

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Alcan Inc. (NYSE:AL) shares rose $20.13, or 32.98%, to $81.14 after rival Alcoa Inc. (NYSE:AA) issued a hostile $33 billion - or $73.25 per share - bid for the company. The deal would create the world's largest aluminum company with annual revenues of $54 billion.

Alcoa CEO Alain Belda commented, "We are very disappointed that those efforts [past negotiations for a buyout] did not result in a negotiated transaction - a conclusion we would have strongly preferred. We believe firmly in the compelling strategic rationale behind the combination of Alcoa and Alcan and are convinced that this transaction creates substantial value for both sets of shareholders and for customers around the world. We are therefore taking our offer directly to Alcan shareholders."

Clearly, the Alcan shareholders are looking for more as shares in the company jumped swiftly past the buyout offer by more than 5%. And if enough shareholders agree, they just might get it. Not only does Alcoa want the company badly, but the merger's cost savings and resulting superior market position may justify a higher price.

The merger would generate a pretax cost savings of about $1 billion annually after three years, with 25% of that in the first year. Moreover, Alcoa plans several divestures in overlapping business segments - such as aerospace - which could help generate more immediate return on investment.

While Alcoa managers have suggested that they are confident the transaction will be approved, shareholders are still apparently banking on Alcan's board to reject the offer in hopes of something higher. Whether or not this happens remains to be seen, but this is definitely a stock to watch!

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