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The Morning Brief: Third Point Target Amgen Announces Big Changes

That was quick. One week after Daniel Loeb’s New York-based hedge fund firm Third Point called on Amgen to separate into two companies, the biotech giant announced a sweeping plan designed to drastically cut costs and return money to investors. Amgen said it will reduce headcount by 600 to 1,100 positions in 2015, in addition to an earlier announced plan to eliminate about 2,900 jobs. It also said it will reduce its “facilities footprint” by 23 percent. In addition, the company said it will repurchase about $2 billion worth of stock through 2015 and increase the dividend 30 percent beginning with the first quarter of 2015.

The company said these and other moves will result in $1.5 billion in annual savings by 2018 and generate double-digit adjusted earnings per share growth through 2018. In a press release Robert Bradway, chairman and chief executive officer at Amgen, emphasized that the company has “four potential product launches” scheduled for 2015 and “a strong pipeline of innovative and biosimilar molecules,” telling investors that Amgen is “well positioned to deliver breakthrough medicines for patients and drive long-term growth.” Chances are that by the time those drugs become blockbusters, Third Point will have moved on to a number of other opportunistic targets.

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New York-based Starboard Value is turning up the heat on RealD Inc., which recently turned down the activist hedge fund firm’s offer to acquire the maker of projection technology for 3-D films. In a letter to Michael Lewis, chairman and chief executive officer of RLD and the company’s board of directors, Starboard said it was disappointed that the company refused to meet with representatives of the hedge fund. Peter Feld, managing member of Starboard, also said in the letter that many shareholders agree that the company should explore “strategic alternatives,” including selling the company.

“The consistent message from shareholders is that maintaining the status quo at RealD is not acceptable,” Feld states. “Not a single shareholder we have heard from is in favor of you simply ignoring our proposal and going back to business as usual.” Earlier this month Starboard offered to acquire the Beverly Hills, California-based company for $12 a share in cash, which was a 29 percent premium over the stock’s closing price the previous trading day.

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Swedish quantitative hedge fund firm Archipel Asset Management is shutting down after its largest investor, Stockholm-based Brummer & Partners, said it is pulling its investment, according to Bloomberg. Brummer accounted for about 85 percent of Archipel’s $740 million assets under management, according to the report. Archipel lost 1.3 percent in the first nine months of this year at the same time many firms employing similar strategies are enjoying their best years since 2008. Last year it lost 3 percent. “The quantitative models serving as the foundation of the fund’s asset management activities have experienced difficulties generating returns,” said Stefan Nydahl, Archipel’s partner and chief investment officer, according to the report.

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Stifel Nicolaus trimmed its price target on hedge fund favorite Facebook from $99 to $94, noting that while the social media giant reported solid third quarter results, it “guided for a significant increase in investments for 2015.” However, the investment bank stressed that it thinks “the long-term fundamental story remains intact.” UBS cut its price target from $95 to $92.

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Credit Suisse raised its price target on hedge fund favorite Allison Transmission to $37 from $35 after the company reported earnings that beat estimates and raised its guidance. Activist hedge fund ValueAct Capital is the largest shareholder, with more than 4 percent of the shares. However, at this point it is not an activist position. At the end of the second quarter, D.E. Shaw & Co. was the second largest shareholder, while Maverick Capital was the fourth largest investor in the maker of automatic transmissions for medium- and heavy-duty commercial vehicles.

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