The Morning Brief: Another Setback for Leon Cooperman

Leon Cooperman is no doubt experiencing another humbling moment. Goldman Sachs Group, where Cooperman was once a vaunted partner, has told the hedge fund manager it is yanking the $300 million it invested on behalf of its retirement plan from Cooperman’s hedge fund firm, Omega Advisors, according to a Bloomberg report. The investment bank told its employees about the decision on Wednesday. The assets, invested in a separately managed account, will be liquidated on October 31, according to the report.

Cooperman and his firm were civilly charged last month with engaging in illegal insider trading. As of August 31, Omega had $5.4 billion under management. Interestingly, the firm had been updating this figure on its website every month but has not yet done so for September.

“Bottom line is that we have done nothing wrong and this will be proven in a court of law,” Cooperman told Bloomberg in a phone interview. “We are disappointed that they couldn’t make an independent decision. They are rewarding the government for bad behavior.”

Through September 20, Cooperman’s Omega Overseas fund had gained 3 percent for the year, Omega Credit Opportunities Fund had returned more than 13 percent and the Omega Equities fund had added more than 5 percent, according to the report.

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Activist hedge fund firm Sandell Asset Management told the board of directors of Bob Evans it plans to conduct a consent solicitation in an attempt to coax the company to split off its two main businesses.

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“We are taking this step only after exhausting every other reasonable, conceivable option available to us, having expended significant efforts over the course of many months seeking, but unfortunately failing, to have the company embrace greater public transparency,” Sandell states in a letter to the board.

Sandell has been asserting for some time that Bob Evans’ stock is way undervalued and that it will never trade close to its true value until it divides its two independent businesses, Bob Evans Restaurants and BEF Foods. It plans to ask shareholders to take action by written consent and to vote in favor of a non-binding proposal. It is recommending that the board “publicly commit to a transparent process leading to the separation of BEF Foods and Bob Evans Restaurants or another alternative that maximizes shareholder value,” and naming the investment banking firm that will help in this process. Sandell also warns the board that although its proposal is precatory (meaning it is a request and not a legal obligation), there are other things shareholders can do that have “teeth.” For example, they have the ability to remove directors at any time without cause and can amend the company’s bylaws with a simple majority vote, which can enable shareholders to remove certain directors and add new ones.

“Because shareholders can take action by written consent, all of this and more can be done essentially at any time and well outside of the confines of an annual meeting,” Sandell warns in the letter. “Notwithstanding these very powerful tools available to shareholders, it is our hope that the Company would not ignore the will of the shareholders, making further action aimed at altering the composition of the board unnecessary.”

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Shares of Och-Ziff Capital Management Group fell another 6.38 percent on Thursday and are now down nearly 14 percent over the past three days since the hedge fund firm announced a $2.3 billion decline in assets over just the past month.

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Shares of hedge fund favorite The Medicines Co. fell more than 8 percent after partner Alnylam Pharmaceuticals said it would stop developing one of its drugs. At the end of the second quarter, activist hedge fund firm Corvex Management was the fifth-largest shareholder, with 4.41 percent of the shares, while Tiger Grandcub Bridger Management was the seventh-largest shareholder, with a 3.44 percent stake. It is also Bridger’s third-largest U.S. stock holding. The stock was also the seventh-largest holding of Folger Hill Asset Management.

Alnylam, whose stock nearly halved on Thursday, has much less of a hedge fund following. However, Tiger Cub Blue Ridge Capital is one of the largest shareholders, although the holding is not a major position for the firm.

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