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The Morning Brief: Eminence Threatens Men’s Wearhouse Proxy Fight
Eminence Capital’s Ricky Sandler has turned up the heat on The Men’s Wearhouse. Sandler, the largest investor with 9.8 percent of the shares, Wednesday made public a detailed presentation describing how shareholders can unlock value and why the company should merge with Jos. A. Bank Clothiers. Eminence said it has retained Moelis & Co. as a strategic advisor. In a rare interview on CNBC, Sandler said he likes the basic business and believes there is additional value of $2 billion for shareholders if the two retailers merge. He also said he would launch a full proxy fight if necessary. “If it takes to next October to get full control of board, we’ll do that,” he stated. He also said he would not like to see the company execute a recapitalization. On November 15, Eminence filed a preliminary solicitation statement with the Securities and Exchange Commission as a first step toward calling a special meeting of Men’s Wearhouse shareholders to vote on a number of bylaw amendments that, if approved, will permit shareholders to remove directors without cause before the next annual meeting.
Shares of J.C. Penney surged more than 8 percent to $9.44 after the company said conditions are now lousy rather than a complete disaster. Although the embattled retailer reported a larger loss than expected for the most recent quarter, it said revenues fell about 5 percent compared with a decline of 27 percent in the comparable period a year ago. It also made a big deal out of how good sales were in October and predicted that sales and profit margins would improve during the upcoming holiday season. Sounds more like an Internet stock, circa 1999.
Just when Greenlight Capital’s David Einhorn thought he was being vindicated for his high-profile short of Green Mountain Coffee Roasters, the K-Cup coffee marketer reports what appears to be good news. Quarterly earnings easily beat expectations and the company announced a new $1 billion stock buyback. It also said it would initiate a 25-cent-dividend per quarter. Sure enough, the stock initially surged in after-hours trading. “GMCR’s Board of Directors implemented this plan based on our continued confidence in the Company’s long-term growth prospects, financial outlook and cash flow generation,” said GMCR’s president and CEO Brian P. Kelley in a press release. “This plan represents a balanced approach to our commitment to delivering increased value to our shareholders while preserving our liquidity and flexibility to reinvest in our business.” But wait! The stock then abruptly dropped more than 5 percent before settling down around 2 percent to 3 percent. Now it will be interesting to see how it trades in the regular session on Thursday.
Shares of Allison Transmission Holdings rose another 2.2 percent to $26.93 and are up more than 13 percent since Jeffrey Ubben’s ValueAct Capital purchased 13.4 million shares at $23.25 apiece on November 11, boosting its stake to 9.9 percent.
Tiger Global Management continues to systematically reduce its stake in TAL Education Group, the China-based after-school tutoring services provider, to 9.2 percent from 12.1 percent.