Building Materials Holding Corporation (NYSE:BLG) shares dropped $1.09, or 8.52%, to $11.70 today after Moody's cut the company's ratings amid continued troubles in the residential housing market. Meanwhile, the company is expected to report earnings tomorrow, which has many investors guessing. There is light at the end of the tunnel, however, as famed activist hedge fund Chap-Cap is involved with the company and pushing for change!

Chapman's hedge fund is primarily seeking to make changes to the company's executive compensation structure. While nobody should punish management for the steep correction in the housing market, the board's granting of generous financial rewards during its 2002-2006 boom years should not be ignored. Through stipulating the the homebuilding cycles are beyond BMH control, corporate and divisional overhead can be restricted by a realistic, practical management team.

Chapman also suggested that the company hire an investment banker to explore the complete or divisional sale of the company. The hedge fund insists that there would be high private equity and public interest in the company through conversations with the company's peers and leveraged consolidators of the home building industry. In the end, BLG is definitely a stock to keep an eye on as this situation unfolds!

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Radyne Corporation (NDAQ:RADN) shares moved up $0.31, or 2.99%, to $11.03 after Discover Group disclosed an 8.8% stake in the company and suggested that the company put itself up for sale. The activist hedge fund is convinced that the company could obtain a 50%+ premium by obtaining a sale price of between $14 and $16.

Discovery Group indicated that discussions with industry participants have suggested that there are multiple parties interested in acquiring the company at a significant premium to today's market price. The combination of Radyne's attractiveness, the robust M&A market, and the high level of interest from strategic buyers could lead to a very attractive valuation for the company.

As a result, Discovery Group demanded in a letter to the board today that the company engage a qualified investment banker to explore strategic alternatives including a possible sale of the company. Moreover, given the hedge fund's M&A experience and intelligence they have gathered from buyers, they believe it likely that the acquirers are readily known, familiar and interested in Radyne, and can put forth proposals in short order. Combined, these factors make RADN a stock that is definitely worth watching!

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Applebees (NDAQ:APPB) shares rose $0.08, or 0.33%, to $24.63 today after The Lion Fund announced that it intends to vote against the proposed merger citing the fact that the $25.50 cash offer substantially undervalues the company. The activist hedge fund, led by Sardar Biglari, aims to block the merger and encouraged the company to consider IHOP's proposed franchising plans to increase value for its own shareholders.

Sardar Biglari expressed his disappointment in the offer through a letter addressed to the company's board of directors. In the letter, the activist investor pointed out the fact that it was IHOP's stock that jumped 16 percent after the merger was announced while Applebees shareholders only enjoyed a one percent increase. This supports their thesis that the proposed transaction is simply transferring value from Applebees shareholders to IHOP's shareholders.

The activist investors also elaborated on how franchising could prove to be a substantial boon to the company's long-term value. The franchise business would enable the company to achieve higher profit margins, assume less risk, and would require very little in terms of capital expenditures. Combined, these strategic moves would lead to healthy cash flows and a higher return on capital. Unfortunately, it would be IHOP's shareholders that realize this value rather than Applebees shareholders if this transaction is approved.

In the end, there is a good argument for Applebees to either remain independent or seek a higher buyout premium. More, The Lion Fund has a successful track record in activist scenarios with its most recent sale of Friendly's Ice Cream at a substantial premium. Combined, many shareholders and investors are hoping to get more bang for their investment buck in Applebees. This makes APPB a stock worth watching!

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