Sara Lee Corporation (NYSE: SLE) may be experience a shakeup after the leader of an activist hedge fund gained a seat on the board. Jeffrey Ubben or ValueAct Capital was installed late last week onto the board of Downers Grove-based Sara Lee. Last winter, the activist hedge fund bought up a 5 percent stake in the company amid its multiyear turnaround effort.

Activist investors like ValueAct Capital typically buy into situations where they preceive value is being obstructed by something that they can fix. Usually, this object is bad management, poor capital structure, or other similar factors. While most activists are considered quite determined and even bordering on mean or evil.

However, ValueAct Capital has taken a completely different tone in this case. The hedge fund said at the time of its purchase that it had no plans to push for any significant strategic changes at Sara Lee and was comfortable with the firm's direction. Regardless, many investors are hoping that the hedge fund will work to help management act more quickly to unlock value.

Christopher Growe of Stifel Nicolaus isn't expecting a major change in the company's direction. The analyst insists that ValueAct has historically worked in unison with management to turn a company's performance around. He added that the presence of ValueAct on the board will also keep the transformation of the business moving along and could add a sense of urgency.

Sara Lee is a global manufacturer and marketer of brand-name products for consumers worldwide focused primarily on meats, baking, beverage and household products categories. The company's operations are organized around six business segments with its significant customers including mass retailers and supermarket chains in the USA and EU.

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Liberty Media Corporation (NDAQ: LMDIA) announced that its board is taking steps to convert the tracking stock for Liberty Entertainment into shares in a subsidiary that would hold the unit's assets. In effect, Liberty Media Corporation will spin-off Liberty Entertainment into its own independent public company. This division includes DirecTV Group, Starz Entertainment, FUN Technology, Liberty Sports Holdings, GSN and Wild Blue Communications.

The current plant would put 50% of DirecTV; 100% of Starz, FUN and Liberty Sports; 50% of GSN; and 37% of WildBlue into the new subsidiary. Liberty Entertainment would also be responsible for about $2 billion in debt, which was incurred when the company acquired DirecTV from New Corporation in April. The move will be tax free for existing holders of the tracking stock and will result in a new company called Liberty Entertainment Inc.

Spin-offs like this one can represent opportunity for investors willing to get their hands dirty. Successful spin-offs occur parent companies are looking to unload debt onto a new public entity while divesting their non-core assets. Liberty is a good example in that they are unloading their debt, but they are only giving up a portion of their stake in their entertainment subsidiaries. This means that the new subsidiary will not have complete control over the future of some divisions.

Successful spin-offs also rely on well-incentivized management to take the reins and work to unlock value in the divisions. Unfortunately, Liberty Entertainment will not only lack the control over key divisions, but will also be run by the same management as the parent. Combined, these factors mean that management may be less likely to take action to unlock value or take dramatic measures to improve the businesses.

In the end, Liberty Entertainment's spin-off does not share many of the characteristics that make spin-offs attractive for investors. The only remaining benefit is the fact that investors can assign the entertainment division with a higher valuation given the pure-play nature.

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Hill-Rom Holdings, Inc. (NYSE: HRC) shares could be headed higher after a popular hedge fund disclosed a large stake. Breeden Capital Management disclosed a 5.25% stake in the provider of medical technologies and equipment, which is up from its stake disclosed in the second quarter. The language in the Schedule 13D filing with the SEC was fairly standard, however, reserving the right to contact management but detailing very little.

Shares of Hill-Rom are up 6.5% for the year-to-date after spinning off from parent Hillenbrand Industries. During its last quarter, Hill-Rom reported better-than-expected earnings and raised its full-year outlook. Fundamentally, the stock is trading with a PEG ratio of 1.56, which implies that it is valued higher than its peers even considering its higher growth. On average, analysts have a "hold" rating on the stock with a 12-month price target of $33 per share.

Breeden Capital Management is known as an activist hedge fund among investors and is led by Richard Breeden - a former Chairman of the Securities and Exchange Commission (SEC). The hedge fund is no stranger to activism and many are speculating that it may be interested in taking some action in this holding. Others suggest that they may simply be interested in the upside that often results from a company spun off from a parent. Regardless, their involvement makes the stock worth watching.

Hill-Rom Holdings, Inc., formerly Hillenbrand Industries, Inc., is the manufacturer and provider of medical technologies and related services for the health care industry, including patient support systems, non-invasive therapeutic products for a variety of acute and chronic medical conditions, medical equipment rentals and health information technology solutions. Hill-Rom's product and service offerings are used by healthcare providers across the healthcare continuum in hospitals, extended care facilities and home care settings.

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Aladdin Knowledge Systems Ltd. (NDAQ: ALDN) shares could be worth $13 a share if one activist shareholder gets their way. Jasmine Holdco LLC, which owns a substantial stake in the company, nominated its own slate of directors to conduct a fair process to maximize shareholder value and provide better corporate governance and oversight for the company. The hedge fund also exercised their right to call a special shareholders meeting within the next two months, made possible under Israeli law.

Jasmine Holdco previous announced on August 21st that it submitted a proposal for the company to acquire all outstanding shares of Aladdin by way of a merger transaction for $13 per share in cash. This offer represents a 50% premium over Aladdin's stock price prior to making public market purchases and a 35% premium over its initial 13D filing on August 7th. The letter also described an alternate proposal to acquire Aladdin's DRM business for $125 million to $135 million in cash.

"Repeated attempts to engage Aladdin in constructive discussions about a transaction to combine part or all of Aladdin with SafeNet have produced no results. Aladdin has rejected all of our proposals and has offered no basis for their conclusions and no strategic plan or valuation approach that would result in greater shareholder value than either of the two Jasmine proposals," said David Fisherman on behalf of Jasmine.

"Jasmine is left with no choice but to call an Extraordinary General Meeting of Shareholders. The current Board and management team do not appear to have a genuine interest in exploring Jasmine’s proposals or other value-maximizing avenues for its shareholders. We are eager to continue discussions with our fellow shareholders regarding the state of the company and look forward to joining them in setting Aladdin on a path to maximize shareholder value."

SafeNet is a global leader in information security. Founded 25 years ago, the company provides complete security utilizing its encryption technologies to protect communications, intellectual property and digital identities, and offers a full spectrum of products including hardware, software, and chips. UBS, Nokia, Fujitsu, Hitachi, Bank of America, Adobe, Cisco, Microsoft, Samsung, Texas Instruments, the U.S. Departments of Defense and Homeland Security, the U.S. Internal Revenue Service and scores of other customers entrust their security needs to SafeNet. In 2007, SafeNet was acquired by Vector Capital, a $2 billion private equity firm specializing in the technology sector. For more information, visit www.safenet-inc.com.

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LDK Solar Co., Ltd. (NYSE: LDK) shares may be surging higher, but at least one short seller sees problems ahead. Asensio noted accounting irregularities at the company after an employee accused the company of making misrepresentations on its accounting of inventories. LDK's most recent financial statements show questionable entries, including its "inventories to be processed beyond one year" numbers. The 87% jump in inventory and 828% increase in accounts receivables are also suspect.

Asensio also questioned today's press release stating that LDK signed a contract to supply 440MW of solar wafers to Hyundai Heavy Industries over a seven-year period, from 2009 to 2015. However, LDK's press release from February 22nd stated that LDK signed a contract to supply 450MW of wafers from late 2008 to 2015. The only differences between the two releases are slight changes in the start date and amount of wafers. Interestingly, there is no reference to the prior announcement and makes it look like a new contact.

Asensio ends by stating: "LDK investors with questions on the company's accounting will not find many answers in its quarterly releases. LDK continues not to release the standard financial statements expected of companies trading in the US. The company apparently does not feel compelled to create greater transparency for investors. LDK only issued quarterly statements in the form of a press release, and even then it did not bother to include a basic cash-flow statement."

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Orange 21 Inc. (NDAQ: ORNG) shares are trading at a discount after a large holder made an offer to acquire the company in a Schedule 13D filing with the SEC. Costa Brava, a hedge fund that owns a 9.6% stake in the firm, offered to purchase the company's remaining shares for $3.90 per share, which represents a 6.8% premium over the current market price. The offer comes at a 30% premium, however, to the August 19th close, and also offers shareholders liquidity not available given the low trading volume.

The proposal is subject to performing satisfactory due diligence on the company and the execution of a mutually satisfactory definitive purchase agreement. Costa Brava indicated that they are available to start due diligence immediately and are prepared to conduct negotiations on a definitive purchase agreement in tandem with the due diligence. Notably, the purchase agreement would not be contingent on any financing, which gives it a higher probability of going through.

Orange 21 has yet to respond to the issues, but many shareholders are hoping that the process will move forward. Others are hoping that the company will hold out for a potentially higher offer that could give shareholders an even larger premium in the event of a buyout. However, it is uncertain whether or not Costa Brava would in fact issue a higher price. The risk of course is that they walk away from the merger and shares return to their $3.00 valuation.

Orange 21 Inc. designs, develops and markets products for the action sports, motorsports and youth lifestyle markets. The Company’s principal products, sunglasses and goggles, are marketed primarily under the brands, Spy and SpyOptic. These products target the action sport and power sports markets, including surfing, skateboarding, snowboarding, ski, motocross, and the youth lifestyle market within fashion, music and entertainment.

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IKON Office Solutions, Inc. (NYSE: IKN) shares are up sharply this week after Steel Partners' Warren Lichtenstein got his wish. The office repair company finally agreed to sell itself to Japan-based Ricoh Co. Ltd. for $1.6 billion after being pressured by the activist hedge fund for some time. Officially, the $17.25 a share deal was the result of the company's "strategic planning process", but the pricing made it a huge win for its largest investor Steel Partners.

Steel Partners is one of the most aggressive hedge funds in the world with a tendency to force changes upon companies. The firm owns about 1/8th of Ikon and paid around $10.50 per share for its stake. That makes this latest deal worth $6.75 per share in profit, which is a healthy gain even when spread over a few years. The news also comes just after Steel Partners won control of Point Blank Solutions (OTC: PBSO) in a hostile takeover attempt.

IKON Office Solutions, Inc. (IKON) is an independent channel for document management systems and services. IKON integrates copiers, printers and multifunction product (MFP) technologies from manufacturers, such as Canon, Ricoh, Konica Minolta and HP, and document management software from companies like Captaris, Kofax, eCopy, EFI, EMC (Documentum) and others, to deliver solutions implemented and supported by its team of global services professionals.

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Sparton Corporation (NYSE: SPA) executives may find themselves in hot water soon after an activist hedge fund built up a stake. Lawndale Capital Management disclosed a 9.9% stake and a series of demands to the board in a Schedule 13D filing with the SEC. The activist hedge fund demanded four new independent directors be installed, requested the board hire an experienced turnaround management team, and reiterated their request that the company explore its strategic alternatives.

With only the recent announcement of current management tasked to implement 'recommendations' of consultants and no mention of reputable outside advisors exploring strategic alternatives, we can only presume the Board is not pursuing obvious steps, preferring instead to remain unaccountable and entrenched," said the hedge fund in its letter. "Lawndale cannot sit idly by while a discredited board relies upon a discredited management team to extricate Sparton from a morass of their own creation."

Lawndale believes that the current management has been given more than enough time to effect a turnaround and it's time for new blood. The hedge fund proposed its own slate of four new directors that could add independence to the board and work to build long-term sustainable shareholder value. The hedge fund also warned that if the board turned a blind eye to its proposal, it would pursue a hostile takeover of the board. The deadline it set was August 29th.

"After years of dissipating shareholder wealth, further improper voting of the Sparton shares held in the employee pension plan and any improper influence over voting of employee 401K plan holdings may potentially expose you all to very costly liability," said the hedge fund. "It is time for Sparton's Board to turn over a new leaf and embrace a more enlightened approach to corporate governance and work with us."

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Cleveland Cliffs Inc. (NYSE: CLF) is fighting an activist hedge fund and seeking support from... shareholders? Harbinger Capital is currently the company's largest shareholder with a 15.57% stake, but it is seeking to increase its stake to as much as 33.33%. The move could damage the firm's plan to purchase Alpha Natural Resources for $8.1 billion, which Harbinger has ademantly opposed for quite some time. With a 2/3 majority required to approve the buyout, a 1/3 stake by Harbinger could be problem.

Recently, Harbinger requested that Cleveland Cliffs hold a shareholder value, required under Ohio law, that would allow the hedge fund to increase its stake to between 20% and 33.33%. The vote is scheduled for this Friday and may lead to the rejection of the $8.1 billion buyout bid. As a result, Cleveland Cliffs has been reaching out to shareholders in an effort to derail the attempt to gain approval - a move that is quite atypical for activist situations.

Today, Cleveland Cliffs came one step closer to buying out the firm by gaining anti-trust approval by the Federal Trade Commission. However, the vote on the proposed buyout is scheduled for October 3rd, giving Harbinger another month to build and prepare its stake to oppose the merger that it sees as a bad move for the company. So far, few other large shareholders have voiced their opinions on the merger, which makes it a situation certainly worth watching.

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99 Cents Only Stores (NYSE: NDN) may be getting more than they bargained for with one large investor. Akre Capital Management disclosed an 11.26 percent stake in the discount chain and recommended that it explore strategic alternatives to unlock shareholder value in a Schedule 13D/A filing with the SEC. These alternatives may include discontinuing certain businesses, repurchasing shares with excess cash and refocusing on maximizing profitability rather than expanding.

Akre Capital Management focused its message on 99 Cents Only Stores' Texas market, which has experienced substantial problems. The hedge fund recommends that the company reconsider maintaining a presence in Texas and asked two key questions for management to consider:

1. What existing Texas operating data can be referenced as evidence that this new strategy will be successful, what capital will remain actually invested in the market, what profits are expected, and how will this strategy be executed?
2. Why does the company believe that expanding finite management resources on a small opportunity in Texas make sense when the remaining 90%+ of the business remains distressed and offers much greater potential?
   

"We acknowledge that the company has begun to address shareholder concerns about a turnaround plan, store growth rate, and use of excess cash," said the hedge fund in a letter to the board of directors. "We are hopeful that these actions mark the beginning of an effort by the company to be more transparent about how it plans to create per share value."

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