The Morning Brief: Activist Hedge Fund Moves on Forest City

Activist hedge fund Land and Buildings Investment Management has called on real estate company Forest City Realty Trust to form a special committee of independent directors to evaluate all “strategic options.” The Stamford, Connecticut investor says there is at least 40 percent upside to the company’s net asset value, given its “enviable collection of high quality real estate and significant embedded upside due to grossly inferior margins.”

The hedge fund firm says in a seven-page letter to fellow shareholders that Forest City’s board should call a special meeting of shareholders immediately after its planned scrapping of its B share class so that the entire 13-person board can be put to a shareholder vote. “Otherwise shareholders may be forced to take unilateral action,” the letter states.

Among its complaints: the board is loaded up with members of the Ratner family, which controls the company. “[The] company’s true failure of corporate governance, characterized by a tangled web of nepotism and self-dealing, has led to significant underperformance,” Land and Buildings states. Forest City’s stock jumped 2.5 percent, to close at $28.66. At the end of the third quarter, Land and Buildings had a roughly $390 million U.S. stock portfolio but did not own any shares of Forest City.

Elliott Management Corp. reduced its stake in British aerospace supplier Meggitt below 5 percent after failing to convince a third party to buy the company, according to the Sunday Telegraph. In August the activist hedge fund firm reported a 5.2 percent stake in the company. The paper says Elliott approached French aerospace firm Safran, as well as Honeywell and United Technologies, to determine whether they wanted to do a deal. Last year, Elliott’s multi-strategy fund posted a 13.1 percent gain.

Valeant Pharmaceuticals International’s stock continues to sink after giving its die hard supporters some early year hope. Shares of the embattled drug company fell another 1 percent on Monday. The stock is now down more than 8 percent year-to-date.