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The Morning Brief: Steven Cohen Finds Buyer for SAC Re
Steven Cohen has found a buyer for his reinsurance company. Hamilton Reinsurance Group has agreed to buy SAC Re for an undisclosed amount, according to published reports. The deal comes after Cohen’s hedge fund firm, SAC Capital Advisors, pleaded guilty to securities fraud charges stemming from the government’s insider trading probe. It agreed to pay $1.2 billion and stop managing money for outside clients. Hamilton is headed by former insurance executive Brian Duperreault and Two Sigma Investments, according to reports.
Shares of hedge fund favorite General Motors fell more than 1 percent on a busy day, when it announced a major management shake-up one day after the U.S. Treasury announced it sold its remaining shares in the auto giant. GM said Mary Barra will take over next month as chief executive, replacing Dan Akerson, who also will also step down from the chairman role. For several GM has been one of the top five holdings of David Einhorn’s New York–based hedge fund firm Greenlight Capital, which is also GM’s twelfth largest investor overall. GM is also the largest holding of New York–based Taconic Capital Advisors.
Paul Singer’s two hedge funds, Elliott Associates and Elliott International, said they won’t sell their shares in Celesio AG to McKesson Corp., which has offered to acquire the German drug distributor for $5.36 billion. The hedge fund firm, which owns more than 25 percent of Celesio, said it believes that McKesson’s offer for Celesio “substantially undervalues” the company and is not in the best interests of Celesio shareholders and bondholders. “Simply put, Elliott believes that Celesio’s shareholders and bondholders are not getting a fair deal at the current price,” it states in a press release. It asserts McKesson could still “benefit from the accretive nature of this transaction” even if it raises its price. It also believes Celesio has other options, such as selling its wholesale business to a strategic bidder and the pharmacy business to a separate buyer.
Shares of Outerwall, one of the largest holdings of New York–based activist investment firm Jana Partners, surged nearly 3 percent on Tuesday, to close at $66.78. The company best known for its Redbox movie rental vending machines announced a major shake-up, including the firing of Redbox president Anne Saunders and the reduction of 8.5 percent of its workforce. The company said the cost reduction initiatives should result in $22 million of annual cost savings beginning in the first quarter of 2014. It also said it would expand its existing senior secured credit facility by $350 million so the company can meet its previously announced target leverage ratio in the first quarter.
“These actions are consistent with the plans we outlined earlier this year and ensure that Outerwall’s operations drive enhanced value creation for both our shareholders and retail partners,” said J. Scott Di Valerio, chief executive officer of Outerwall, in a press release, clearly not acknowledging any role the hedge fund headed by Barry Rosenstein may have played, even though he is the company largest shareholder. Interestingly, it was not among Jana’s top-10 holdings at the end of the third quarter when it took its initial position. Outerwall said it expects to use the additional borrowed money to buy back its shares, a favorite recommendation among activist hedge fund investors, including Rosenstein. Outerwall said it expects to repurchase $195 million of stock in 2013, which would result in the company returning more than 100 percent of its free cash flow in 2013, exceeding its target. It also plans to repurchase an additional $50 million of stock by January 31, 2014.