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Morning Brief: JANA Drops Proxy Fight with EQT

The activist hedge fund firm is still planning to vote against the company’s acquisition of Rice Energy.

  • By Stephen Taub

JANA Partners has dropped its proxy fight with EQT Corporation. The activist hedge fund firm headed by Barry Rosenstein said in a regulatory filing that it will cease soliciting proxy materials but still plans to vote against the company’s acquisition of Rice Energy. JANA has maintained that EQT’s shares are undervalued but that the best way to address this situation is to break it into two separate companies: exploration and production and midstream. It thinks a merger would create less value than splitting. The vote for the Rice deal is scheduled for Thursday, November 9.

On September 13, EQT announced that once the Rice deal closes, it will create a board committee to research ways for “addressing EQT’s sum-of-the-parts discount.” It said the committee with announce a recommendation by the end of the first quarter of 2018. JANA said in its latest regulatory filing that it may still pursue change at EQT’s board “depending upon various factors, including the outcome” of the board’s review of its sum-of-the-parts discount and how it plans to act on it.

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Marcato Capital Management filed a definitive proxy statement for the election of nine individuals to the board of directors of Deckers Outdoor Corporation. The San Francisco activist firm owns 8.4 percent of the shares of the company best known for its UGGs brand. “Deckers’ Board has failed its stockholders repeatedly, over a multi-year period, and should not be trusted to deliver on its goals,” the hedge fund firm asserted in its filing. The firm’s Marcato International fund is up about 18.6 percent for the year through October, according to an HSBC document that tracks hedge fund performance.

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John Paulson posted another sharp loss in October. The Schroder GAIA Paulson Merger Arbitrage fund, a UCITS fund (undertakings for the collective investment of transferable securities, a type of European mutual fund) offered on the Schroder Investment Management platform, fell about 4.8 percent last month and is now down nearly 19 percent for the year, according to an HSBC document detailing hedge fund performance. Although the fund only manages $125 million, a person with knowledge of the fund confirms this performance is in line with that of Paulson Partners, Paulson & Co.’s oldest fund, which specializes in merger arbitrage.

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Credit Suisse cut its price target on hedge fund favorite Allergan from $243 to $224 but maintained its outperform rating on the stock. The investment bank explained in a note to clients that it is adjusting its sales and earnings estimates following the drug company’s third-quarter results. It says its “blue sky” valuation is $284, while its “grey sky” valuation is closer to $158. “The main risks to our call include disappointing commercial performance for key products such as Botox, Juvederm and Linzess, or disappointing data from pipeline assets such as the oral CGRPs and abicipar,” Credit Suisse stated in the note. At the end of the second quarter, at least 84 hedge funds held a position in the stock, including 23 that included the stock among their top-ten holdings, according to Goldman Sachs.

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