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The Morning Brief: Companies Not Prepared for Activist Attacks

There seems to be a new story every day about some sort of new investment, proxy fight or settlement involving an aggressive activist investor seeking change. However, it seems many public companies still have not gotten the memo. According to a new survey from the National Association of Corporate Directors, more than 20 percent of companies’ boards were approached by activist investors during the past year. Yet shockingly, 46 percent of the companies that participated in the survey said they have no plan in place for responding to an activist’s overtures. What’s more, smaller-cap boards are less prepared than larger-cap boards. This explains while many of the smaller activist hedge funds have targeted these smaller companies.

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Jeffrey Ubben’s ValueAct Capital said in a regulatory filing it thinks shares of Baker Hughes are “undervalued” and “represented an attractive investment opportunity.” Back in January, when the San Francisco-based investor filed its initial 13D, all it said was it bought the stock “for investment purposes.” ValueAct, which owns 5.3 percent of the oil field services company, also said in the latest filing it intends to have some sort of conversation with management and the board of directors to discuss ways to “enhance shareholder value.” It also threatened to take some sort of unspecific future actions. The stock rose 1.24 percent to close at $55.31, which is down from around $69 earlier in the year.

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Two Tiger Cubs made big bets on a pair of biopharmaceutical stocks. But they did not enjoy the same outcome.

For example, shares of Kite Pharma surged 1.55 percent after O. Andreas Halvorsen’s Greenwich, Connecticut-based Viking Global Investors more than tripled its stake in the clinical-stage biopharmaceutical company to nearly 2.69 million shares, or 6.1 percent of the total outstanding. On the other hand, shares of TG Therapeutics fell 3.2 percent even after Roberto Mignone’s New York-based Bridger Management more than doubled its stake in the biopharmaceutical company to more than 3.15 million shares, or 6 percent of the total outstanding.

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Deutsche Bank trimmed its price target on DuPont from $66 to $63 following the surprising retirement of CEO Ellen Kullman even though the investment bank calls her “the single biggest impediment” to a break-up of DuPont. It points out that her successor, Ed Breen, broke up Tyco twice when he served as chief executive. “As interim CEO, we believe the likelihood of DuPont being broken up has increased substantially,” states Deutsche Bank, adding that the separation of DuPont into an Ag/Nutrition/Biosciences company and a Chemical/Materials company would “unlock substantial shareholder value.” Despite its target price cut, it does note that its sum of the parts analysis works out to a value of $67 per share, so it is retaining its buy rating. The stock surged 7.66 percent on Tuesday to close at $55.21. Activist firm Trian Fund Management, which lost a proxy fight with the company earlier in the year, said on Monday it recently boosted its stake in DuPont, which was 2.71 percent at the end of June, making it the fourth-largest shareholder at the time.

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UBS cut its price target on hedge fund favorite Illumina from $250 to $200 after the provider of genetic sequencing and array-based services issued an earnings warning for the third quarter. In a note to clients, the investment bank says it was prepared for below consensus sales and earnings per share numbers but longer term it says the company has a “dominant market share” in a “large and emerging” market. So, it retained its buy rating on the stock. As we recently reported, two of llumina’s largest shareholders at the end of the second quarter were Greenwich-Connecticut-based Tiger Cubs Lone Pine Capital and Viking Global Investors. The stock Tuesday closed down 10.64 percent at $145.81, and is now down nearly 40 percent since mid-July.

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BlueMountain Capital Management named Summer Jarratt as client advisor overseeing its West Coast business development and client service in order to boost the New York firm’s growth efforts in the western U.S. The firm, with $22 billion under management, recently received new mandates from the Orange County (CA) Employees Retirement System and the New Mexico Public Employees Retirement Association (NM PERA). Prior to joining BlueMountain, Jarratt co-managed client relationships and business development for Los Angeles-based Empyrean Capital Partners.

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