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The Morning Brief: Icahn Joins Hedgies in Allergan Trade

Former hedge fund manager Carl Icahn said on Monday that he has joined one of the most crowded hedge fund trades. The octogenarian activist investor said he recently acquired “a large position” in Botox maker Allergan, stressing he is “very supportive of CEO Brent Saunders.” However, Icahn did not disclose the exact size of the stake.

In a tweet and a separately created website, Icahn takes credit for hiring Saunders as the chief executive officer of Forest Labs a few years ago, saying he “worked cooperatively and constructively with [Saunders] to help increase value for all Forest shareholders.” Icahn goes on to say that shortly afterward Forest was acquired by Actavis, the company that subsequently merged with Allergan and then assumed the Allergan name.

At the end of the first quarter, Allergan was the second most widely-held stock among hedge funds, with 184 reporting a position. This was up from 165 the previous quarter, according to quarterly research from investment bank Goldman Sachs. In addition, at the end of the first quarter, 63 of the hedge fund investors held Allergan among their top-ten holdings.

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Keith Meister’s Corvex Management bought nearly 600,000 shares of Signet Jewelers, boosting its stake to 8.3 percent. The New York activist manager, who previously worked for Carl Icahn, bought about 160,000 of the shares from April 19 to April 22 for between $111 and $112 per share. Meister then bought the rest of the shares after the stock plummeted more than 10 percent on May 26, paying $98.25 for a big chunk and a little over $99 for the rest.

On May 26, the retailer reported quarterly earnings that beat expectations. However, revenues came in below estimates and its guidance for future same-store sales suggests a sales slowdown. Chief executive officer Mark Light said in a press release at the time that the company plans to undertake “a formal and comprehensive strategic evaluation” of its credit portfolio. “This is a top priority,” he added.

In its filing, Corvex commended the company for announcing plans to conduct the evaluation of its credit portfolio, calling on it to “complete this review as quickly as reasonably practicable” and then announce actions that would “create the greatest enhancement to financial and shareholder value.” At the end of the first quarter, 24 percent of Signet’s market capitalization was held by hedge funds, making it the fourth most concentrated hedge fund stock among companies in the Standard & Poor’s 500 stock index, according to Goldman Sachs.

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Shares of Cliffs Natural Resources surged more than 39 percent on Tuesday after the company announced it entered into a new long-term agreement with ArcelorMittal USA to supply iron ore pellets for the next 10 years. At the end of the first quarter, East Setauket, New York-based Renaissance Technologies was the third-largest shareholder, with 5.73 percent of the total shares outstanding, while New York-based Coatue Management was the ninth-largest shareholder. The stock had been an activist target of Donald Drapkin’s Casablanca Capital until the Wall Street veteran dealmaker died in February following a skiing accident.

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Hedge fund favorite Celator Pharmaceuticals surged more than 71 percent, to close at $30.03, on Tuesday. The clinical-stage biopharmaceutical company, which develops therapies to treat cancer, on Tuesday said it will be acquired by Dublin-based Jazz Pharmaceuticals for $1.5 billion. At the end of the first quarter, New York macro firm Caxton Associates was the largest shareholder, followed by New York-based Visium Asset Management. Other top-ten holders included New York-based Perceptive Advisors and Boston-based Adage Capital Management.

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