Reddy Ice Holdings Inc. (NYSE:FRZ) may face problems with its proposed buyout after concerns surfaced that GSO Capital Partners may not be able to obtain the financial needed from Morgan Stanley to complete the $1.1 billion transaction. Perhaps equally troubling is the low $21 million breakup fee that would give GSO Capital little reason to try and salvage the deal if things went bad. Shareholders also remain divided on whether the company would best be sold or kept under current management.

The news only adds to other bad news that has already clouded the deal. The management of Reddy Ice was hit by shareholder protests against the price spearheaded by players like Noonday Asset Management and Shamrock Activist Value Fund. Meanwhile, GSO announced that it would need more time to secure the financing necessary to complete the transaction given the current market conditions. And problems only compounded as the company missed its July earnings targets as the CEO and COO announced that he was leaving the company.

Unfortunately, there is little left to support a $25 share price short of a merger actually being consummated. It will be interesting to see whether or not GSO and the company can complete the transaction, otherwise shareholders will be left with an underperforming company that can’t sell itself and lost its CEO and COO. There appears to be only problems left with this stock now…

Related Companies
MGP Ingredients Inc. (MGPI)
Green Mountain Coffee (GMCR)
Lifeway Foods Inc. (LWAY)

Kellwood Company (NYSE:KWD) directors may have to fight for their jobs after private equity fund Sun Capital Parnters announced that it is considering a renewed bid to take over the clothing company through a hostile conditional tender offer. Kellwood rebuffed a previous offer of around $544 million, calling it too low without even putting it to a vote. Many shareholders are hoping that the move will go through and help boost shares from $17.59 today to over $21 in the event of a success.

Sun Capital’s new offer is expected to come in at the same $21 per share, but would include a key condition – the removal of a poison pill in Kellwood’s shareholder rights plan that prevents any holder from owning more than 20 percent of the company. The offer is also likely to be conditioned on the acceptance of a substantial enough portion of shareholders, in order to reduce the risk to Sun Capital of holding useless shares in the event that the move is unsuccessful.

So, what are the chances of success? Well, as we mentioned earlier there is a huge poison pill in place to protect the incumbent board. A vote of at least 75 percent is required to remove a director while only half of the board comes up for election in a given year. However, even if the bid proves to be unsuccessful, a large portion of shareholders voting against the company should send a clear message to the board that shareholders are unhappy with the company.

Overall, this is definitely a situation that is worth watching. If the private equity fund, which holds a 9.9% stake now, is able to garner enough support to increase their stake through a tender offer, we could see substantial changes aimed at unlocking shareholder value even further. It will be interesting to see how this one plays out…

Related Companies
Liz Claiborne Inc. (LIZ)
Jones Apparel Group (JNY)
Polo Ralph Lauren (RL)

State Street Corporation (NYSE:STT) shares jumped today after the company announced that it is setting aside $618 million to cover legal expenses and other costs stemming from its fixed-income strategies. State Street decided to set up these reserves after several customers complained that subprime investments were made inappropriately, which the company acknowledged to a certain extent. Shares rose as many assumed the fallout would be much worse than was revealed.

“Some of our customers that were invested in the active fixed-income strategies have raised concerns that we intend to address,” said CEO Ronald Logue in a statement. “Nevertheless, we will continue to defend ourselves vigorously against inappropriate claims, including those that seek recovery of investment losses arising solely from changes in market conditions.”

State Street also announced that the CEO of the firm’s investment management division, William Hunt, would be stepping down and replaced by interim CEO James Phalen. The company did not detail the problems that caused the blow-up, but many are speculating that it was a result of stretching their money in order to boost returns through investment in subprime securities, commercial papers, and other risky investment instruments.

Shareholders applauded the fact that the company was able to sidestep most of the damages. State Street said it was on track to earn between $3.42 and $3.45 per share in 2007, which shows revenue growth of 20 to 22 percent – well above the range the company forecasted on October 16th. Combined, these factors make this a stock worth watching!

Related Companies
SEI Investments Company (SEIC)
PNC Financial Services (PNC)
AllianceBernstein Holdings (AB)

Luby’s Inc. (NYSE:LUB) board of directors may be in trouble after a proxy advisor recommended that shareholders vote for three board candidates backed by the company’s largest independent shareholder. Ramius Capital, which owns around 9.6% of the company’s shares, nominated four directors in its quest to unlock shareholder value but the proxy group noted that three should be sufficient to influence the board to consider the issues.

Ramius Capital, an activist hedge fund, suggested that the company consider strategic alternatives, including selling real estate and leasing back the sites for its restaurants. The move could provide the restaurant chain with a massive cash influx that could be used to enhance shareholder value through buybacks or dividends. The move could help boost shares substantially after they have been hit by poor performance during recent months.

Proxy Governance, a proxy advisory firm, said, “We believe that, even in the event that they brought no new operational ideas or business strategies to the table, the dissident’s nominees would still offer a significant opportunity to shareholders in their willingness to consider governance changes at the company, something the current board has been reluctant to allow.”

Meanwhile, the Luby’s board urged shareholders to reject the offer, arguing that Ramius is attempting to masquerade as a corporate governance and restaurant industry expert while really focusing on short-term strategies designed to rob the company of operating cash flows and kill future growth prospects. This thinking likely stemmed from the fact that the hedge fund initially requested that the company put itself up for sale; however, the hedge fund insists that it would not use its director control to influence the company. Regardless, this is definitely a stock worth watching!

Related Companies
EACO Corporation (EACO)
Darden Restaurants (DRI)
Ruby Tuesday Inc. (RT)

Nautilus, Inc. (NYSE:NLS) shares spiked today after an activist hedge fund won control over the Washington-based company’s board in a proxy contest. New York-based Sherborne Investors announced that it won four seats on the company’s seven-member board, which gives them the majority control that they need to enforce change.

“We appreciate the support of our fellow shareholders and look forward to working with the new board and management to implement an effective strategy at Nautilus to return it to profitability and establish a platform for future growth,” said Bramson in a statement.

The new board will include Sherborne managing partner Edward Bramson as Chairman as well as Gerard Eastman, Michael Stein and Richard Horn. These directors will join incumbent directors Robert Falcone, Ronald Badie and Marvin Siegert.

“I look forward to working with our newly reconstituted Board of Directors,” said Bob Falcone. “I believe very strongly in the future of this Company and am committed to implementing the necessary actions to restore it to sustainable growth.”

Nautilus also announced that it signed a commitment letter with the Bank of America to replace its current debt facility with an underwriten 5-year, $100 million asset-backed loan with an accordion feature to increase to $125 million. The loan, expected to close January 14th, will provide the company with the working capital that they need to undergo the changes sought by the activist hedge fund.

In the end, this is all great news for shareholders as change is finally being enforced. Clearly, the new hedge fund board members will be focused on delivering value for shareholders while the existing board will continue to provide valuable advice for the general business. Combined, these factors make NLS a stock worth watching!

Related Companies
Insight Enterprises (NSIT)
Cybex International (CYBI)
Coldwater Creek (CWTR)

Centro Properties Group (ASX:CNP) shares spiked today when the company announced that it would consider putting itself up for sale after it was approached by several parties interested in its business. The Australian shopping mall owner invited potential suitors to make pitches as its board evaluates all options, including a sale of the company. Shareholders are hoping that the company will take action to unlock value and jump the stock’s share price, which had declined 89 percent in 2007.

Centro owns about 810 properties in Australia, New Zealand, and the U.S. and had planned to pay off its short-term loans by selling long-term debt on the commercial mortgage-backed securities market through attractive terms. However, the recent crisis has caused borrowing costs to rise and asset-backed securities to fall forcing the company to get a two-month extension from its creditors. This led to a substantial drop in the company’s share price as many investors question its integrity going forward.

Then, Centro shares dropped 76 percent on December 17th after the company cut its earnings forecast by 14 percent, suspended its first-half dividend and said it may have to sell properties as part of a restructuring to pay back debt. Given the recent popularity of mall properties around the world, this move prompted many interested parties to contact the company seeking more information on these asset sales.

“In recent days, we have received a significant number of unsolicited expressions of interest from a large range of strategic and financial investors in potential investments in the group and certain of our assets,” said Brian Healey, Chairman of Centro. “Therefore, as part of the strategic review process, Centro is now seeking expressions of interest for key alternatives available to it.

Centro is now requesting expressions of interest for two different scenarios. The first is a review of the company as a whole, including a recapitalization, equity issuance or acquisition. The second is interest in its Australian and U.S. wholesale funds, which reportedly account for a substantial portion of the interest they received. This announcement sent shares dramatically higher today, but many are quick to point out that the parties are mostly interested in purchasing the company’s assets not equity. So, it’s difficult to say how much the stock is worth. Regardless, this is definitely a stock worth watching!

Related Companies
Westfield Group (WDC)
GPT Group (GPT)
Goodman Group (GMG)

Vonage Holdings Corporation (NYSE:VG) shares rose more than ten percent today after the company announced that it has settled its patent dispute with Nortel Networks without paying any money out of pocket. Investors have been concerned for some time that the VOIP provider may be forced into bankruptcy if it was ordered to pay hefty fines to old-telecom companies that it walked over. Shareholders applauded the move as it marks one of the final lawsuits hovering over the company.

The new settlement involves a limited cross license to three Nortel and three Vonage patents and dismisses claims relating to past damages and remaining patents. Vonage was initially dragged into this lawsuit after it acquired Digital Packet Licensing, which was suing Nortel at the time for the violation of three patents. Vonage continued the lawsuit before it was countersued by Nortel, who claimed that Vonage was violating 13 of its own patents and asked that the VOIP provider be shut down and kept from using the technology.

This settlement is a great deal compared to Vonage’s settlements in four other patent lawsuits where it was forced to pay the other side money for prior use of its product. These lawsuits sent Vonage shares tumbling amid worries that they would be forced to shut down their service because they were in violation of basic patents on the technology itself. However, these were all resolved in exchange for cash, where AT&T received $39 million while Sprint and Verizon received a total of $200 million.

In the end, this is good news for Vonage who now appears to be cleared of outstanding lawsuits that threatened to send them into bankruptcy. Shareholders are hoping that the company can now turn itself around and focus on building revenues and profitability. Combined, these factors make VG a stock worth watching closely!

Related Companies
Towerstream Corporation (TWER)
ShoreTel Inc. (SHOR)
Infinera Corp. (INFN)

Sybase Inc. (NYSE:SY) directors may have to fight for their job after an activist hedge fund nominated its own slate of directors to the company’s board, according to a Schedule 13D/A filing with the SEC. Sandell Asset Management Corporation announced that it has notified Sybase Inc. of its intention to nominate three highly qualified independent candidates for election to the board of directors in 2008. Shareholders are hoping that this move could help unlock value in the company’s shares, which have remained somewhat stagnant.

Sandell’s move towards a proxy contest follows a letter and presentation delivered to the company on October 12, 2007 outlining specific actions the hedge fund believed the company should take to improve value for all shareholders. Specifically, the Sandell requested that the company immediately:

1. IPO and spin-off 100% of the Mobility segment.
2. Aggressively use the balance sheet to repurchase shares.
3. Sell the company as a whole or in parts.

Since that time, the company has taken no discernable action on any of these issues, nor has it taken any of its own actions to improve value. Sandell continues to believe that the actions detailed in its letter and presentation would materially improve the company’s valuation to the benefit of all shareholders, and it intends to conduct a proxy contest in order to realize those gains.

“We have attempted to encourage the company, both publicly and privately, to take action to improve its current discounted share price, but have been very frustrated by the apparent complacency of the board and management towards creating value,” said Thomas Sandell, founder of Sandell Asset Management. “We feel that shareholder representation on the board is warranted to ensure that all alternatives are being considered and a course of action is taken to bridge the gap between the current share price and its inherent value.”

Overall, any of the actions suggested by Sandell could go a long way in unlocking shareholder value. Proxy contests can be difficult and expensive, however, and it is uncertain as to whether they will be able to obtain the board seats that they need to enforce change. Regardless, this is definitely a stock worth watching into the next annual meeting!

Related Companies
Microsoft Corporation (MSFT)
BMC Software Inc. (BMC)
Oracle Corporation (ORCL)

Delta Petroleum Corporation (NDAQ:DPTR) shares rose more than 20 percent today after Tracinda Corporation agreed to take a 35 percent in the energy company at a 23 percent premium to Friday’s close in a deal valued at around $684 million. Kirk Kerkorian’s Tracinda Corporation is well known activist hedge fund that specializes in restructuring companies and unlocking shareholder value. Shareholders are clearly confident that the activist will work to unlock value.

“Under Roger’s leadership, Delta Petroleum has become a very important company in the industry, with valuable resource plays, a strong asset base and well-positioned exploration projects that we believe hold significant growth potential,” said Tracinda Corporation in a statement. “Our investment will provide the company with the capital to accelerate its exploration activities, while giving Tracinda and Delta Petroleum shareholders the ability to realize value from its growth going forward.”

Delta Petroleum announced that the transaction would enable them to accelerate development drilling activities in its core areas, including the Piceance and Paradox Basins. Furthermore, the company noted that the investment will give it much more financial flexibility to fund its long-term drilling programs and allow for additional acquisitions.

“We are very pleased to have Tracinda Corporation as an investor and strategic partner in Delta,” said Chairman and CEO Roger Parker. “This transaction will provide the means to significantly increase the present value of our vast resource potential. The additional capacity provides Delta the financial flexibility and wherewithal to grow the company to new levels. We are very enthusiastic about the future for Delta.”

Notably, Tracinda Corporation withdrew their offer for a 20 percent stake in Tesoro Corporation – another energy company – last month due to a perceived lack of energy experience combined with a steep decline in refining profit margins. It appears that this investment may be a replacement designed to fill an energy spot in Mr. Kerkorian’s portfolio. Regardless, this is definitely a stock worth watching closely over the next few months!

Related Companies
Berry Petroleum Company (BRY)
Whiting Petroleum Corp. (WLL)
Warren Resources Inc. (WRES)

Many U.S. and European banks are reportedly considering divesting certain units in order to recapitalize for the tough times ahead, according to the Wall Street Journal. Banks considering such drastic moves are Citigroup (NYSE:C) and HSBC Holdings (NYSE:HBC) among others. Shareholders are hoping that these moves could help recapitalize the firms enough to avoid any further share dilution or worse.

Citigroup may shed or shut down several of its mid-sized units valued at around $12 billion while HSBC could exit all or parts of its $13 billion U.S. automotivd financing division, the Journal reported today. Citigroup units that may be shed include Student Loan Corp, its North American auto lending business, Redecard SA (its Brazilian credit card company stake), and its Japanese customer finance business. Meanwhile, HSBC is considered well capitalized but has experienced many issues with its automotive business that has been lagging behind.

One of the larger rumors circulating is that Citigroup may be considering a sale of Smith Barney, which could approach $10+ billion in value alone. Citigroup has a business that is fairly independent of its retail banking, commercial banking, and investment banking operations. And Smith Barney has about 9.3 million client accounts with around $1.6 trillion in total assets. Whether or not parting with Smith Barney would cause any real harm is uncertain, but it is a huge business that certainly could be sold in order to preserve liquidity.

Many are anticipating any units put up on the block to be acquired by Asian banks or sovereign wealth funds looking to build their portfolio of cheap dollar assets. Meanwhile, if Citigroup decides to sell its stake in Smith Barney, it is likely that a well-capitalized bank like Wachovia may consider acquiring it. Regardless, this is a situation that is definitely worth watching closely!

Related Companies
ING Groep NV (ING)
Legg Mason Inc. (LM)
Deutsche Bank (DB)