Dillard’s Inc. (NYSE: DDS) shares surged higher after an activist investor demanded to see its records. Barington Capital Management demanded to see records of everything from the firm’s plane fleet to business expense reimbursements in a Schedule 13D/A filing with the SEC. Why? According to the filing:

The purpose of this demand is to enable Barington and Clinton to investigate and communicate with the Company’s stockholders regarding matters relating to their mutual interests as stockholders, including, without limitation, the use of corporate assets, the levels and types of compensation, perquisites and benefits provided to directors and executive officers of the Company or related parties, the nature of any family, business or personal relationships between the Company’s executive officers and directors, Board oversight and certain decisions by the Board or its committees regarding the foregoing matters or otherwise affecting the Board, the management or corporate governance of the Company or other interests of stockholders.

This isn't the first time that activist shareholders have targeted Dillard's either. In March, Mitarotonda and Hall requested copies of Dillard's books and records in anticipation of a proxy fight. Luckily, Dillard's eventually reached a deal with the shareholders and added four new Class A directors to its board. What happens now remains to be seen, but shareholders are clearly bullish on the prospects.

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Meadow Valley Corporation (NDAQ: MVCO) shares jumped higher after one of the stock’s biggest shareholders voiced opposition to its planned merger. Carpe Diem Capital Management disclosed a 7.35% ownership stake and demanded that the company not lower the buyout price to anything lower than the proposed $11.25 per share.

The Meadow Valley board is meeting in the coming month to discuss whether or not to accept a lower offer for the company. However, the hedge fund threatened to nominate its own slate of directors to affect an organic turnaround rather than accept a lower offer. These initiatives would include cost cutting, focused management, and various other actions to unlock value.

According to the Schedule 13D/A filing with the SEC:

To reiterate again, we do not want to take over and run Meadow Valley, we want our existing Board to complete the proposed transaction on time and on price. We offered our assistance to the Board in order to give ourselves and other Shareholders comfort that the transaction as contemplated will happen. Your continuing to ignore a major shareholder with more experience and a track record of success has forced us to take the view expressed herein. Only as a last resort, and if the Board cannot consummate the transaction on time or at price, would we take the actions described above. It should also be stated that we would expect, once Shareholders have spoken, to have the full cooperation from the Board and management.

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Magnetek, Inc. (NYSE: MAG) directors and management may find themselves out of a job if a large activist hedge fund gets their way. Riley Investment Management (RIM) holds an 8.8% stake in the company and recently sent a letter to the board suggesting that the firm put itself up for sale. The hedge fund believes that the company's market size and ongoing pension liability will make it difficult for shareholders while its brand and niche may be interesting to potential buyers.

Here's a copy of the letter:

As you may know, Riley Investment Management LLC has been an investor in Magnetek for over 7 years. During this time, we have seen the Company transform itself from a bloated undisciplined company to a business with a significant presence in strong niche markets. While we have been pleased with the Company's operational performance, the devotion of the management team and the improved balance sheet, we strongly believe that the best course of action for the shareholders would be to immediately begin a sale process of the Company. We believe that this process could garner a price at significant premiums to the current market capitalization and attract multiple large bidders.

The Company's most recent quarter was impressive. Revenues of $26.4 million were up 16%, your book to bill was 118% and your cash increased to $16 million. Most importantly, operating income almost doubled from last year. These numbers were particularly strong given your investment in the alternative wind business. We applaud your improvements to the operations.

However, we believe that your market size, market capitalization and ongoing pension liability will make it difficult for your shareholders to receive fair value on the open market. Conversely, it is our opinion that larger corporations who have long been interested in the Magnetek brand and niche markets will be willing to acquire the Company's businesses at significantly higher values than the current market capitalization.

Moreover, we believe that value may be best maximized by selling your businesses in pieces as opposed to a total sale. This process, while perhaps more time consuming and difficult, can result in each business unit receiving full value as opposed to a sale to a single buyer who will discount the pieces that they don't want.

We urge you to formally begin this process right away. Additionally, as a large shareholder with a significant track record in creating shareholder value we request a board seat immediately. Given our involvement in the sales of companies with several business units (i.e. Alliance Semiconductor, Celeritek), we believe we can be a great help in this process. Additionally, it is our experience that a large shareholder involved not only adds a sense of urgency but also creates an environment in which service fees are more carefully reviewed and possible options are more broadly considered.

We have written many letters to the board over the last few years and made many requests of management. This one is unique in that we hold the Board and management of Magnetek in high regard. However, our view that shareholders would recognize more value through a formal sales process is strong, and we hope that this message is well received. We will continue to evaluate all of our options as it relates to our Magnetek position.

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