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COMMENTARY
Many shareholder activism experts, public company executives, board members and activist investors expected shareholder activismto surge once again in 2011. With growing support from pension funds, a burgeoning M&A environment, excessive cash on
companies balance sheets, and a slew of new corporate governance reforms coming out of Washington, most factors were certainly
pointing in that direction.
Thus far, the era of Dodd-Frank reform has yielded no such result. By contrast, according to data compiled from Hedge Fund
Solutions weekly research on activist investing [Catalyst Equity Research Report], activism is actually down for the first 5 months of2011 compared to that of 2010. Within the referenced period, the number of companies targeted by activists has fallen 15% to 142 so
far this year.
While it is clear that shareholder activism has fallen, there remains a lack of credible explanation for this. For one, it could very wellbe that the corporate governance reforms enacted and pending were over-hyped. It could also be that stock volatility and concerns
about the economy have made investors wary about getting involved in multi-year investment campaigns.
Whatever it may be, one should certainly not dismiss 2011 as an uneventful year for activism. Indeed when we look beyond thecontested elections that culminated in a shareholder vote, we see that much more is happening behind the scenes than what is upfront
and apparent. 2011 should be seen as the year that activism moved further away from the public limelight and inside the boardroom.Although 25 campaigns concluded with a shareholder vote so far (12 of these involved dissidents seeking board representation), 27
concluded with a settlement agreement between the activist and board of directors of the target company. In our opinion, this is a signthat both sides have become more adept at managing shareholder activism, knowing when best to concede, negotiate or fight.
166
142
137
93
0
20
40
60
80
100
120
140
160
180
2010 2011
NumberofTargetsandActivists
5MonthsEndingJune1
Targets
Activists
65
27 25
10
0
10
20
30
40
50
60
70
Current
Campaigns
Settlements Shareholder
Vote
Withdrawn
2011ActivistCampaigns
January1,2011-June1,2011
Targets
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Note: In general, this data reflects shareholder demands and binding shareholder proposals from investors owning at least 5% of a target companys stock.This data does not include non-binding shareholder proposals such as say-on-pay, majority voting, board de-classification and poison pills.
MostActiveActivistInvestors
January1,2011June1,2011
1. BulldogInvestors 9CompaniesTargeted(InvestmentFocus:Closed-EndFunds)
2. JosephStilwell8Companies(InvestmentFocus:Thrifts/Banks)
3. DiscoveryCapital7CompaniesTargeted4. FinancialEdge/PLCapital 6Companies
(InvestmentFocus:Thrifts/Banks)
5. CarlIcahn5CompaniesTargeted6. StarboardValue4CompaniesTargeted
(FormerlyRamiusCapital)
7. WesternInvestment 4Companies(InvestmentFocus:Closed-EndFunds)
8. ElliottAdvisors3Companies9. LawrenceSeidman3Companies10. NormanPessin3Companies
52
17
26
69
14
BreakdownofActivistDemands
January1,2011-June1,2011
M&A
Operational
Financial
Governance
NotDisclosed
9
16
27
0
5
10
15
20
25
30
ActivistWins ManagementWins Settlements
ShareholderVoteResultsComparedtoSettlements
January1,2011-June1,2011
ShareholderVote
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Target Ticker Market Cap Activist(s) Ownership Demand Meeting Date Outcome
2011 Activist Campaigns Ending in a Shareholder Vote (as of June 1, 2011)
Myers Industries, Inc. MYE $343M GAMCO Investors 10.10%Elect 2 GAMCO representatives to
board April 29, 2011All nine of management's nominees
were elected
NovaMed Inc. NOVA$105M
(Taken Private)HealthInvest Partners 5.10%
Reject $13.25/share buyout from
Surgery Center Holdings
Special meeting on
May 4, 2011
Activist defeated; company merger
approved
Opti Inc. OPTI.OB $22M S. Muoio & Co 28.25% Elect 1 Director May 23, 2011Activist defeated; activist challenging
results
Pulse Electronics PULS $192M Bel Fuse Inc. 1%Elect 2 Bel Fuse representatives;
sell Company to Bel FuseMay 18, 2011 Dissident defeated
Red Robin Gourmet Burgers RRGB $555M Clinton Group; Spotlight Advisors 9.73%
Remove the poison pill and pledge
not to adopt another one without
shareholder support; explore
strategic alternatives
May 26, 2011Poison pill removed; board
declassified
Singapore Fund SGF $139M City of London Investment Group 24.85%
Terminate investment advisory
agreement between the Fund and
Daiwa SB Investments
June 2, 2011Investment advisory agreement
terminated
Smurfit-Stone Container Corp SSCC$3.6B
(Taken Private)
Third Point; Monarch Alternative
Capital; Royal Capital8.97%
Opposed Rock-Tenn buyout offer
equal to 50% cash ($17.50/share)
and 50% stock (0.0365/RKT
shares)
Special meeting on
June 2, 2011
Activist defeated; company merger
approved
United PanAm Financial Corp. UPFC.PK $107M Lawndale Capital NAOppose $7.05 Management-led
buyout
Special meeting on
February 24, 2011
Activist defeated; company merger
approved
Zoran Corp. ZRAN $393M Ramius Capital 9.30% Elect 6 Ramius representatives
Special Meeting on
March 11, 2011
Ramius received enough written
consents to replace 3 board membersat ZRAN
Shareholder Vote
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Target Ticker Activist(s) Ownership Demand Withdrawl Date Reason for Withdrawl
Advanced Analogic Technologies,Inc. AATI Dialectic Capital 6.10% Support merger with Skyworks Solutions; elect 2individuals to 7-member board May 26, 2011 AATI announced merger with Skyworks Solutions
Celera Corp. CRABiotechnology Value
Fund24.50%
Reconstruct proposed merger to carve out non-
strategic drug royalties or raise purchasing price
per share
May 17, 2011 Celera merged with Quest Diagnostics
Charles River Laboratories
InternationalCRL
Relational Investors;
CalSTRS6.01%
Form a Strategic Planning and Capital Allocation
Committee; explore strategic alternatives,
including a sale
January 25, 2011
2 new directors nominated by management; company
formed a strategic planning and capital allocation
committee
Immersion Corp. IMMR Ramius Capital 5.90% Elect 3 Ramius representatives March 11, 2011IMMR reached a settlement agreement with Dialectic
Capital and nominated 2 Dialectic representatives
McCormick & Schmick's SeafoodRestaurants Inc. MSSR Landry's Restaurants 10.10% Sought to acquire company for $9.25/share incash; May 4, 2011 Company initia ted a sale process
Matrixx Initiatives MTXX BML Investment Partners 9.90% Sell to HIG Capital at least at $8.75/share February 18, 2011 Taken private by HIG Capital for $8.75/share
Matrixx Initiatives MTXX Porter Orlin 12.40% $8/share sale to HIG Capital undervalues MTXX February 18, 2011 Taken private by HIG Capital for $8.75/share
Tessco Technologies Inc. TESS Discovery Group 13.50% A majority vote standard in uncontested elections April 25, 2011
On 25-Apr-11, the board approved a bylaw
amendment stipulating a majority vote standard in
uncontested elections
Tenet Healthcare Corporation THCCommunity Health
Systems