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The Morning Brief: Jana Partners Takes Stake in Outerwall

Barry Rosenstein’s Jana Partners has disclosed a new activist position. The New York City hedge fund firm, which is up 14.2 percent this year through September 30, disclosed after the market close on Friday that it owns 13.5 percent of Outerwall, best known for its Redbox movie rental vending machines. In a 13D filing, Jana said the stock is undervalued and that the firm intends to have discussions with the company’s board and management regarding several issues, including exploring a “strategic transaction,” selling or discontinuing certain businesses, or pursuing a sale of the company altogether. Jana also said it plans to discuss the company’s capital structure, including providing for a “significant return of capital to shareholders,” although it does not specify whether it is hoping for a major dividend distribution or a buyback of shares. The stock rose 9.43 percent in regular Friday trading — even though the disclosure was made after the market close — and more than 6 percent in aftermarket trading, to more than $60.

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Sotheby’s is the latest target of an activist investor to adopt a poison pill intended to make it harder for unwanted investors to accumulate big blocks of stock in the company. The auctioneer company said the shareholder rights plan would be triggered if an investor buys at least 10 percent of the stock, including through the use of derivatives. The rights plan expires in one year. The company said in a press release that the poison pill “guards against coercive tactics to gain control without paying all shareholders a premium for that control and facilitates the ability of all shareholders to realize the full long-term value of their investment in the company.” Last week, Daniel Loeb’s Third Point said it lifted its stake in Sotheby’s to 9.3 percent, making the New York City hedge fund firm the company’s largest shareholder. Loeb also fired off a letter questioning the board’s performance, strategic direction and governance and urging a series of changes, including calls for William Ruprecht to resign as chairman, president and chief executive officer and for the role of chairman to be separated. In response to the Sotheby’s announcement regarding the poison pill, Loeb fired off a press release lambasting the company, asserting, “Rather than address our well-documented citations of mismanagement and initiate a constructive dialogue with its largest shareholder, the board and the CEO have attempted to further entrench themselves… It is clear that today, the Chief Executive Officer and his hand-picked directors have put their job security ahead of shareholders.” In addition to Loeb, San Francisco-based Marcato Capital Management — headed by Richard McGuire III, who previously worked for Loeb rival William Ackman of Pershing Square Capital Management — owns 6.7 percent of Sotheby’s, while New York City-based Trian Partners owns about 3 percent of the shares.

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Stephen Mandel, Jr's Greenwich, Connecticut-based Lone Pine Capital disclosed it owns more than 10 million shares of Pandora Media, or 5.3 percent of the streaming music provider’s shares. It did not own any shares of the company as recently as the end of the second quarter. ----

Shares of J.C. Penney dropped another 6.54 percent, to close at $7.86 on nearly 2.5 times the average daily volume. This suggests that one of the ailing retailer’s big shareholders could have been selling on Friday. However, remember that only those who own more than 5 percent of the stock must report any changes in their holdings, and they have 10 days to do so.

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