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The Morning Brief: Jana Partners Goes on a Safeway Shopping Spree

Barry Rosenstein’s Jana Partners disclosed that it owns 14.95 million shares of Safeway, including options to purchase 3.53 million shares of stock, for a total stake of 6.2 percent. Jana, based in New York, was the supermarket company’s third largest new investor at the end of the second quarter, with more than 1.2 million shares. The filing came hours after Safeway announced that it has adopted a one-year stockholder rights plan, saying in a press release it “has become aware of an accumulation of a significant amount of the common stock.” The preemptive move is designed to “help promote the fair and equal treatment of all stockholders” and enable the board “to discharge its fiduciary duties.” The company will deploy a poison pill if a person or group acquires at least 10 percent of the stock, or 15 percent in the case of a passive institutional investor. Safeway did not identify the investor. The stock, which had surged at the market’s opening, closed up 10.41 percent at $30.96 Tuesday. In its regulatory filing, Jana said the shares are undervalued and represent “an attractive investment opportunity.”

Interestingly, the hedge fund also disclosed that its managers have already had discussions with Safeway’s management regarding a review of strategic alternatives. These alternatives include reviewing the markets in which the company operates and exiting certain underperforming business in lower margin geographies. Jana’s filing also said the hedge fund managers have discussed — and may continue to discuss — Safeway’s capital structure, including a plan to significantly return capital to shareholders, transferring its stake in a certain business to shareholders, and improving investor communications.

ValueAct Capital’s Jeffrey Ubben apparently continues to wield his influence at Microsoft. The software giant announced on Tuesday that it is raising its dividend by 22 percent. Microsoft also announced a new $40 billion stock buyback to replace a similar one that is expiring at the end of this month. “These actions reflect a continued commitment to returning cash to our shareholders,” said Amy Hood, chief financial officer of Microsoft, in a press release. The San Francisco-based activist hedge fund firm owns about 0.8 percent of the stock. Shares of Microsoft rose slightly to $32.94. The company’s move comes the morning of the day Ubben was scheduled to speak at an investment conference in New York and ahead of Microsoft’s meeting with analysts later this week. Ubben, however, told the conference audience he could not discuss Microsoft.Instead he elaborated on another core holding, insurance broker Willis Group.

Shares of teen fashion retailer Aeropostale surged more than 18 percent Tuesday after activist investor Hummingbird Management disclosed it owns nearly 8 percent of the stock. Remember, we reported a few days ago that Tiger Cub Tiger Consumer Management raised its stake in Aéropostale by more than 80 percent since the end of the second quarter, to more than 6.4 million shares. The New York City firm founded by Patrick McCormack now owns 8.21 percent of the stock.

Shares of Herbalife surged another 3.8 percent to close at $73.30. As a result, the stock is now up more than 20 percent this month alone. There is speculation that short sellers are covering ahead of a potential stock buyback. But is William Ackman’s Pershing Square Capital Management one of those shorts that is covering? Doubt it.

Credit Suisse raised its price target on the stock of Mondelez International to $36 from $34 and told clients in a note that the snack food giant’s stock could rise to $44 in two years. The bank says the company, which changed its name from Kraft Foods after the 2012 spinoff of Kraft Foods Group, its North American grocery business, recently established “lofty goals” for margins in its “brewing defense” against Nelson Peltz’s activist hedge fund Trian Partners. Peltz wants the company to merge with PepsiCo.

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