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The Morning Brief: Daniel Loeb’s Third Point Scores Win Against Dow Chemical

Score another one for Third Point’s Daniel Loeb and activists in general. The Dow Chemical Company announced it will add four new independent directors to its board under a deal with the New York–based activist hedge fund firm, according to a regulatory filing. All of the directors will be nominated at the 2015 annual meeting. The move will boost the number of directors from 10 to 13 by January 1, but Dow agreed to trim this number to 12 by the 2016 annual meeting. Under the deal, Third Point agreed to vote in favor of the company’s nominees and agreed to a one year standstill and voting agreement.

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Pershing Square Capital Management sold more than 2.24 million shares of Allergan for more than $473 million under an earlier joint investment arrangement with Valeant Pharmaceuticals, according to a regulatory filing. The proceeds go to Valeant under their deal. The New York–based hedge fund firm sold 591,051 shares on November 19 for $212.80 per share, bringing in more than $125 million. The following day it sold 1,651,509 shares at $210.36 a pop, for a total of $347.4 million. After the transactions, Pershing Square now owns 8.9 percent of Allergan’s shares. Separately, Valeant said it will buy up to $2 billion in senior notes, stock and other securities under a new securities repurchase program, effective immediately. It will replace Valeant’s existing repurchase program.

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Steven Cohen’s investment firm, a family office called Point72 Asset Management that previously operated as the hedge fund firm SAC Capital Advisors, will end another practice that was frowned upon by the government. Cohen converted Stamford, Connecticut–based SAC to Point72 last year after SAC pleaded guilty to insider trading and agreed to pay $1.8 billion in fines to settle the case.

The firm now says it will no longer solicit its employees’ best trading ideas for a central pool also known as the “Cohen Account,” a practice referred to as “tagging.” Under the old policy, employees received an additional bonus if their idea was used and was profitable, according to a Bloomberg report.

“The government cited tagging prominently in its case against SAC and the cases brought against its employees, believing tagging created an incentive for an employee to seek improper information in the hope of receiving a ‘tag bonus,’” Douglas Haynes, president of Point72, said in a memo obtained by Bloomberg.

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Hedge fund redemption requests rose to 5.05 percent in November from 3.12 percent in October, according to The SS&C GlobeOp Forward Redemption Indicator. Bill Stone, chairman and chief executive officer of SS&C Technologies, said in a press release that the increase was “in line with seasonal expectations” due to year-end investor rebalancing. SS&C GlobeOp’s data represents about 10 percent of the hedge fund industry.

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Investment bank Stifel Nicolaus cut its price target on Greenlight Capital favorite Marvell Technology Group from $18 to $16, stressing that the semiconductor manufacturer’s recent quarterly revenues missed the bank’s and the consensus estimates. It adds in a note to clients that although management expects the company’s mobile business to turn around starting with its April quarter, it has “concerns over erosion of average selling prices and gross margin.” Meanwhile, Deutsche Bank cut its price target on the stock from $16 to $14. The stock has consistently ranked among Greenlight Capital’s largest disclosed long positions.

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