2009

But as many struggle, and many go bankrupt, what's the best tack for a company to take? Sale-leasebacks are not always the ideal route for companies strapped for cash selling, especially in today's poor real estate market. Here is a look at some recent campaigns, who keeps popping up and what they have called for:

Wattles, in the meantime, insisted June 24 there were interested parties in the running Circuit City, though the question remained whether Blockbuster was still one of them. When the movie rental giant made public its offer for Circuit City -- which could be backstopped by Blockbuster investor and fellow activist Carl Icahn -- in April, Wattles encouraged it, and HBK Capital Management, a shareholder in both companies, said it might help finance such a deal. Back in February, Wattles, whose Wattles Capital Management LLC owns a 6.5% stake Circuit City, nominated five directors to the beleaguered electronics retailer's board, later winning seats for three. He also called for Schoonover's ouster. Dealscape's Matthew Wurtzel wondered whether the investment could mean bankruptcy was imminent:

The investment is the second big position Wattles has taken in an electronics retailer; he's the largest shareholder of Ultimate Electronics Inc. Interestingly, he amassed his holdings in Ultimate shortly before its 2005 Chapter 11 bankruptcy filing and bought half its stores at a bankruptcy auction. Prior to his career as an activist investor, Wattles was best known as the founder of Hollywood Entertainment Corp., which he sold to Movie Gallery Inc. for $1.2 billion in 2005. Good timing. The combined company is now in bankruptcy.

Target Corp.

Assuming Barnes & Noble were to buy Borders at a premium (also assuming antitrust issues do not impede a deal), Ackman -- who is Border's largest shareholder with an 18% stake, which could grow to 28.8%  if he were to exercise recently obtained warrants -- could pad his pockets with either cash, Barnes & Noble stock or a possible combination of the two. And based on the meteoric rise of Borders' shares on the news by 12.13% to $7.12 per share in late morning trading Wednesday, shareholders are optimistic about a premium deal.

The bookseller in March said would suspend its quarterly dividend and that it had hired J.P. Morgan Securities Inc. and Merrill Lynch & Co. to explore a possible sale. Borders said Pershing Square committed to lending it $42.5 million and could buy some of the firm's international operations. Terms were renegotiated, Dealscape's Ron Orol wrote April 7: "Pershing Square will pay $135 million for the bookstore's international chain, up from $125 million. The revised deal also includes a lower interest rate of 9.8% on a $42.5 million senior secured term loan offered by the activist fund." The news comes nearly six months after Pershing changed its passive, 13G filing status in the bookseller, opting to take an activist stance with its 11.7% stake through a 13D filing.

The Deal's Scott Stuart noted at the time:

Pershing said it changed its filing status to enable it to freely communicate with Borders, although it said it did not believe its activities would effect a change of control.

Nevertheless, the 13D status and remarks in the filing make it clear that Pershing considers it an option to solicit proxies to elect a slate of directors. Pershing is considering its options regarding possible director nominees, a source said.

The move followed an amended 13D filing by Spencer Capital Management LLC and T2 Partners Management LP, which collectively held 8.5%, stating that on Sept. 25 the funds asked Borders to place a member of their group on the board. It had been on a restructuring path. Days earlier, the company sold BGI (UK) Ltd., its London operations, and Borders Books Ireland Ltd. to buyout shop Risk Capital Partners, canceling certain debts and taking a 17% stake in the privatized company.

The stage was set for a proxy showdown May 8 between plus-sized retailer Charming Shoppes and its activist investors, but the company gave in, according to the Philadelphia Inquirer, agreeing to add two nominees put forth by Crescendo Partners LP and Myca Partners Inc., to its board and postponing its shareholder meeting until June. The activists own a stake of about 8% in Lane Bryant parent Charming Shoppes and have shunned the company's executive compensation plan and stock performance. Charming Shoppes filed suit against the dissident group, alleging it offered misleading information in an SEC filing. The retailer said April 25 it had tapped Banc of America Securities LLC and Lehman Brothers Inc. to explore options for its catalogs catering to female twenty-somethings in order to stay focused on its Lane Bryant, Catherines and Fashion Bug brands.

Furniture Brands International Inc.

Kicking off May days ahead of the Target news, Florida private equity firm Sun Capital Partners Inc. said it had won a months-long battle with Furniture Brands, and that the company's shareholders had elected three Sun Capital nominees to the company's board. Final results are expected around May 20. Sun disclosed in February it was trying to buy the St. Louis furniture company at a "substantial premium" to its $500 million market capitalization. The bid was rejected, so Sun went for a board overhaul.

Dillard's Inc.

Barington Capital Group LP's chairman and chief executive James Mitarotonda's longstanding activist campaign at family-run department store chain Dillard's reached a settlement late on April 1. Barington and fellow hedge fund, Clinton Group Inc., nominated a slate of four directors for the company's 12-person board. The retailer agreed to add one of his candidates, as well as three who were mutually agreed upon, and Mitarotonda agreed to call of his campaign.

Barington again put the pressure on Dillard's in February, demanding in a letter dated Feb. 29 to see a list of the company's shareholders as it stepped up its campaign. The news came a month after Barington, Clinton Group and RJG Capital Partners LP, collectively holding nearly 5.32% of Dillard's, suggested measures to boost its value, particularly with respect to real estate assets. The January news came seven months after Mitarotonda sent a letter to the company's chairman and CEO William T. Dillard II about a meeting to talk about boosting profitability. Other retailers Barington had taken activist positions in included Stride Rite Corp., Steven Madden Ltd., Payless ShoeSource Inc. and Pep Boys-Manny, Moe & Jack, The Deal's Dave Shabelman noted.

Syms Corp.

And then there is discount clothing retailer Syms. The Secaucus, N.J., company in mid-February said it would re-register its stock with the SEC and relist on the Nasdaq after months of pressure from Barington and Esopus Creek Advisors, which collectively hold 9.8% of Syms. But Esopus wanted more. In late April, the investor pressured Syms to evaluate its real estate assets. The firms were opposed to the retailer's plans to delist from the New York Stock Exchange, which it did Jan. 14. Thanks to the pair's effort, Syms relisted on April 1. Syms argued the deregistration was aimed at avoiding new costs including Sarbanes-Oxley-related fees, while investors contended it was to lower the value of the stock price so management could carry out an MBO at a lower valuation. The agreement to re-register rendered moot a law suit that was brought in connection with the delisting.

Meanwhile, Eddie Lambert bought Sears and Kmart and mashed them together back in 2004. One thought was that even if the businesses foundered, the real estate would be worth more than the stores, Orol noted. He wrote at the time:

As the architect of Kmart Holding Corp.'s $11.5 billion acquisition of Sears Roebuck & Co., Edward S. Lampert has shone a light on a new force in dealmaking: hedge funds.

Lampert, chairman and chief executive of ESL Investments Inc. of Greenwich, Conn., is part of a small but increasingly bold group of hedge fund managers who buy large stakes in undervalued companies and then work from the inside to enhance their luster. He has taken the strategy up a notch by using private equity to orchestrate a deal in which he owned 53% of Kmart and 15% of Sears.

Lampert's recent attempt to purchase Restoration Hardware Inc. is in limbo at the moment; as the go-shop window was set to close Feb. 28, Sears upped its offer for Restoration to $4.55 per share, bettering an agreed-to $4.50 per share deal with buyout firm Catterton Partners. Restoration said it would move ahead with its sale to Catterton. And days later in a regulatory filing, Sears said it might consider a tender offer for the company or teaming up with Catterton.

And as they travel in similar circles, Lampert and Ackman have run into each other. For Ackman, Stuart noted:

A bet on Eddie Lampert's Sears Canada Inc. panned out well but only after initiating a gritty Canadian legal battle when Sears Holdings Corp. tried to buy in the subsidiary. Ackman blocked Lampert's bid, and Sear's Canada shares have paid off since. Ackman says Sears Canada became hostile only because the offer was too cheap. Meanwhile, Ackman has recently been buying Sears Holdings stock because he believes in Lampert's ability to generate returns.

J.C. Penney Co.

Carl Icahn, one of the original activist investors, in February confirmed he had taken a significant stake in J.C. Penney. A Wall Street Journal report ahead of the confirmation noted the stake was large enough to be counted among his top five investments. Icahn's may push the company to sell real estate to pay for a share buyback, Dealscape's Wurtzel noted. Icahn also has stakes in Children's Place Retail Stores Inc. and Blockbuster Inc.

Home Depot Inc.

And over at Atlanta-based DIY retailer Home Depot, Relational Investors LLC's Ralph Whitworth had a hand in unseating Bob Nardelli from the chief executive spot in January 2007. He argued the company should stop spending on the supply business (which it sold, under renegotiated terms, last year) and return money to shareholders and shake up the board.