Kraft Foods (NYSE:KFT) is now home to yet another famous investor as Warren Buffet joins the ranks of famed activist investors Carl Icahn and Nelson Peltz who have already built up sizable stakes in the company. Shareholders are hoping that the involvement of all these famed investors will result in extraordinary gains.

It is unclear whether Buffet, who owns less than 5 percent of the company, will side with the two activists in their plans for the company. Icahn and Peltz proposed a divesture of key brands in an effort to provide quicker returns for shareholders. There is speculation that they could face some problems with Buffet, however, given his track record of investing in companies undergoing a restructuring brands internally - he might be siding with management.

Many others insist that Buffet may simply be interested in the prospects of the spin-off combined with a strong brand. Historically, spin-offs have tended to outperform the larger market in their first few years as an independent company, especially when the company possessed a leading brand. Clearly, Kraft is a great fit for this type of strategy and so far the company's shares are up over 11% since the spin-off was completed last March.

In the end, this is definitely a unique situation given the involvement of so many famous investors that may even be on opposing ends of the spectrum when it comes to plans for the company's brands generating poor operating results. Combined, these factors make KFT a stock that is definitely worth watching!

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Washington Group International's (NYSE:WNG) merger plans have been drawing some criticism from shareholders. Today one the company's largest shareholders, David Einhorn, said in a regulatory filing today that he would vote against the plans. The 10 percent shareholder believes that the proposed $2.3 billion transaction is a bad deal for shareholders and insists that few other large shareholders support the idea.

David Einhorn's lengthy letter to the board of directors opposed not only the undervalued bid but also the sale process itself. During the sale process, the company relied on the fairness opinion of Goldman Sachs instead of conducting an auction process despite the fact that the company received several unsolicited bids earlier. More, based on the proxy statements, it is clear that the board relied on an overly conservative forecast the failed to properly value the company's future growth prospects. Various contracts and income opportunities that were not fully appreciated could add substantial value to a buyout price that Einhorn estimates as high as $117 per share!

David Einhorn also argued that the company may be better off as a standalone enterprise. Washington Group is over-capitalized at the moment and URS, the acquirer, plans to take advantage of the fact to get a relatively cheap transaction. Einhorn argues that this cash could be returned to shareholders in the form of a special dividend or share buyback if the company decided against the proposed transaction. If the company were recapitalized at the same proportions as the buyout, shareholders could obtain $27.50 per share in cash and keep the company instead of selling out for $43.80!

In the end, the proposed transaction is clearly bad news for shareholders. Given that a 10 percent shareholder now publicly opposed the merger while insisting that others feel the same way, there is a possibility that the merger could be rejected. If this happens, we could see higher bids in an auction process or significant actions taken to unlock shareholder value through a recapitalization. Either way, this is great news for investors and definitely makes WNG a stock worth watching!

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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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