CATALYST EQUITY RESEARCH REPORT Weekly Research Highlighting Activist Investments

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1 Weekly Research Highlighting Activist Investments Subscribe to receive this FREE Report ed weekly.

2 HIGHLIGHTING ACTIVIST INVESTMENTS Week Ending July 26, 2013 SYMBOL COMPANY INVESTOR ALR Alere, Inc. Coppersmith Capital AM American Greetings Corp Zev Weiss BMC BMC Software Elliott Associates BSP American Strategic Income II Bulldog Investors HEWA HealthWarehouse.com Karen Singer; Lloyd Miller HMA Health Management Associates Glenview Capital Management IL IntraLinks Holdings, Inc. Altai Capital ODP Office Depot, Inc. Starboard Value PCC PMC Commercial Trust REIT Redux PFN PIMCO Income Strategy II Brigade Capital YHOO Yahoo! Inc. Third Point (HFS) provides investment research, strategy and stakeholder communications consulting to companies and investors interested in, or involved with, shareholder activist campaigns. Since 2001 HFS has become the trusted advisor to numerous institutional investors, CEOs and board members worldwide. HFS also administers The Official Activist Investing Blog, the definitive source for activist shareholder information. Catalyst Investment Research is a portfolio of activist investing research products that combine company-specific shareholder activism research with deep value investment analysis and access to industry insiders. PORTFOLIO OF ACTIVIST INVESTING RESEARCH INCLUDES: Daily Alerts Weekly Summary of Activist Investments Quarterly Buying Analysis of Top 50 Activist Investors Company-Specific Shareholder Activism Analysis (combining shareholder activism & deep value company analysis) Special Reports on Activist Investing 400+ Page Shareholder Activism Report & Regularly Updated Shareholder Activism Resource Portal To Learn More: Download a brochure Page 2 of 12

3 Alere, Inc. (ALR) Activist Investor: Coppersmith Capital; Scopia Capital Shares 5,660,770 Catalyst: % Outstanding 7.0% Coppersmith announced ISS and Glass Lewis recommends voting for all 3 Coppersmith nominees Share Price Revenue 2.9B Market Cap 2.4B Enterprise Value 5.9B Net Cash -3.5B 590M 52 wk. range EV/ 10.0 On July 22 Coppersmith issued a shareholder presentation seeking to elect 3 directors. A copy of Coppersmith s presentation is available here: On May 8 we reported Coppersmith disclosed a 5.8% active ownership stake and sent a letter to the board suggesting the stock is significantly undervalued and nominated 3 individuals for election to the Board. A copy of Coppersmith s May 8 letter is available here: On June 10 Coppersmith commented on ALR s preliminary proxy materials, expressing disappointment at the board s rejection of cooperation. In addition, Coppersmith announced it will seek the election of 3 Directors to the Board. On July 2 Coppersmith filed definitive proxy materials to elect 3 directors to ALR's board. A copy of Coppersmith s proxy statement is available here: Coppersmith sent a letter to ALR shareholders and issued a presentation seeking to elect 3 directors to ALR s board. A copy of Coppersmith s July 8 letter is available here: A copy of Coppersmith s presentation is available here: Proxy Solicitor to Coppersmith Capital Legal counsel to Coppersmith Capital Continue to Next Page Page 3 of 12

4 American Greetings Corp. (AM) Activist Investor: Zev Weiss Shares See Comment Catalyst: % Outstanding See Comment On July 22 Zev Weiss issued a presentation highlighting the "Weiss Family's Perspective" on its buyout offer. Share Price Revenue 1.9B Market Cap 612M Enterprise Value 809M Net Cash -200M 164M 52 wk. range EV/ 4.9 On May 30 TowerView announced its belief that the company would do better if the $18.20/share MBO transaction was not consummated. TowerView (6.2% at an avg. cost of $18.98/sh) requested the investment bank working with the Board withdraw their fairness opinion and asked the two members of the Special Committee that they change their recommendation of the proposed transaction. The Weiss family owns a 10% economic interest in AM but controls half the votes through a special share class. A majority of minority shareholders are required to approve the transaction. On July 2 the Weiss family raised its offer price from $18.20 to $19.00 per share. TowerView issued a presentation it made to ISS seeking support to vote down the $19/share buyout from the Weiss family. In the presentation TowerView suggests AM s value should be $ $23.68/share. A copy of TowerView s presentation is available here: BMC Software, Inc. (BMC) Activist Investor: Elliott Associates Shares 13,697,300 Catalyst: % Outstanding 9.6% Elliott agreed to contribute a portion of its ownership toward a new investment stake in the privately-held company. Share Price Revenue 2.2B Market Cap 6.4B Enterprise Value 6.6B Net Cash -160M 608M 52 wk. range EV/ 10.8 We previously covered BMC in our July 5, May 25 and May 18, 2012 Catalyst Research Reports, initially highlighting Elliott s activist investment in BMC. On May 15 Elliott sent a letter to the board stating their belief that the board should immediately engage in a serious, concerted effort to pursue a sale. On May 21 BMC responded to Elliott s demands stating that, The BMC Board is focused on creating value for all stockholders through the execution of its differentiated strategy to provide the most comprehensive portfolio of heterogeneous, integrated IT management solutions to enterprises of all sizes around the world. On May 25 Elliott disclosed it had increased its ownership from 5.5% to 6.5% since nominating 5 directors. On July 2 BMC entered into a settlement agreement with Elliott. Under the terms of the agreement BMC expanded the size of the board from 10 to 12 members and appointed 2 of Elliott s nominees. On April 8 Elliott announced its standstill agreement with BMC has expired. On May 6 Elliott agreed to vote for a $46.25/share buyout offer from a consortium of private equity firms. Proxy Solicitor to Elliott Associates Legal counsel to Elliott Associates Page 4 of 12

5 American Strategic Income Portfolio II (BSP) Activist Investor: Bulldog Investors Shares 895,609 Catalyst: % Outstanding 5.6% Bulldog disclosed a 5.6% active stake in BSP BSP is currently trading at a % discount to its Net Asset Value. Share Price 7.94 Revenue Market Cap Enterprise Value Net Cash 52 wk. range EV/ HealthWarehouse.com (HEWA) Activist Investor: Karen Singer; Lloyd Miller Shares 2,276,607 Catalyst: % Outstanding 16.4% Singer and Miller filed definitive proxy materials to elect 3 directors to the board on August Share Price 1.60 Revenue 12M Market Cap 39M Enterprise Value 42M Net Cash -4M -5M 52 wk. range EV/ Negative On January 25 Singer and Miller sent a letter to HEWA notifying the Company that, as a result of the Company s event of default under the Convertible Notes, Singer and Miller are exercising their rights under the U.C.C. and intend to notice a public sale of the collateral securing the Convertible Notes. On May 7 New Atlantic Ventures (9.26%) rep on the board resigned and sent a scathing letter to the board commenting on his inability to fulfill his fiduciary duty. A copy of New Atlantic s resignation letter is available here: On May 31 Singer and Miller nominate 3 individuals for election to HEWA s board. Continue to Next Page Page 5 of 12

6 Health Management Associates (HMA) Activist Investor: Glenview Capital Shares % Outstanding 37,757, % Catalyst: On July 25 Glenview issued a shareholder presentation supporting its position to elect a new board. A copy of the presentation is available here: Share Price Revenue 5.9B Market Cap 4.0B Enterprise Value 7.4B Net Cash -3.5B 932M 52 wk. range EV/ 7.9 On June 11 Glenview announced it was urging HMA to increase the threshold on its poison pill from to 25%. On June 13 HMA announced it had hired Morgan Stanley and Weil, Gotshal & Manges in connection with Glenview s investment and the ongoing consideration of strategic alternatives and opportunities available. HMA also announced the Board had formed a strategic committee to find a replacement for its CEO. On June 24 Glenview began a Consent Solicitation to replace 8 Directors and launched a website Glenview issued a press release announcing that it has added a 9th nominee for election to the board. A copy of Glenview s July 3 rd press release is available here: Glenview also updated its shareholder presentation: Glenview announced it will deliver consents to begin the 60-day process of replacing HMA s board of directors; Glenview also reduced the size of its slate from 9 to 8 nominees. Glenview s consent solicitation statement is available here: HMA s Consent Revocation Statement is available here: IntraLinks Holdings, Inc. (IL) Activist Investor: Altai Capital Shares % Outstanding 3,613, % 5.72 Catalyst: Altai disclosed a 6.4% "active" stake in IL On December 12, 2011 Discovery Capital disclosed a 5.8% "active" stake in IL. Share Price 9.89 Revenue 221M Market Cap 534M Enterprise Value 545M Net Cash 0 5M 52 wk. range EV/ On April 24, 2012 Discovery increased its "active" stake from 5.8% to 6.8%. Page 6 of 12

7 Office Depot, Inc. (ODP) Activist Investor: Starboard Value Shares % Outstanding 42,278, % Catalyst: Starboard filed its definitive proxy materials to elect 4 directors at the August 21 annual meeting. A copy of Starboard s press release announcing the filing is available here: Share Price 4.48 Revenue 10.5B Market Cap 1.3B Enterprise Value 1.4B Net Cash -104M 236M 52 wk. range EV/ 5.9 On July 22 ODP filed its definitive proxy materials and sent a letter to shareholders. We previously covered ODP in several Catalyst Research Reports, initially highlighting Starboard s September 17, 2012 letter to ODP s Chairman stating that they strongly believe the company s shares are deeply undervalued. On October 12 we reported that Starboard had increased its active ownership stake from 13.3% to 14.8% since sending a letter to the Chairman on September 17. On November 16 Starboard sent a letter to ODP criticizing them for adopting a poison pill takeover defense. In the letter Starboard stated that the pill was designed to effectively cap our ownership at our current position and limit the voting ability of shareholders, while protecting the status quo. A copy of Starboard s November 16 letter is available here: On November 27 Starboard disclosed it has retained Joseph Vassalluzzo (former Vice Chairman of Staples) and Bob Nardelli (former CEO of Home Depot) as advisors to its investment in ODP. On January 24 ODP announced management has had conversations with Starboard and, as a result, is extending the deadline for nominating directors to the board to the close of business on February 25, On February 20 ODP announced a merger of equals with Office Max (OMX). On February 27 Starboard sent a letter to the ODP board recommending they obtain consent from OfficeMax under its merger agreement to immediately explore a sale of the Company s JV interest for $690.5 million to Grupo Gigante S.A.B. On March 18 Starboard issued a press release announcing it has nominated 6 individuals for election to ODP s board. A copy of Starboard s nomination press release is available here: On April 22 Starboard sent a letter to the board commencing a consent solicitation to elect new directors. A copy of Starboard s April 22 letter is available here: On June 12 Starboard filed a complaint requesting the Delaware Chancery Court compel ODP to hold its 2013 annual meeting. On June 17 ODP announced its annual meeting will take place on August 21 (with a July 11 record date). The special meeting to vote on the proposed merger between ODP and OfficeMax was July 10. Legal counsel to Starboard Value Proxy Solicitor to Office Depot Page 7 of 12

8 PMC Commercial Trust (PCC) Activist Investor: REIT Redux Shares 583,140 Catalyst: % Outstanding 5.5% On July 22 REIT Redux sent a letter to PCC expressing several concerns over transaction with CIM Urban REIT. These concerns are extracted from REIT Redux s letter and include: Share Price 9.46 Revenue 13M Market Cap 100M Enterprise Value 197M Net Cash -98M 52 wk. range EV/ Substantial Discount to Value. On various measures either the implied price of $10.50 per share or the current post announcement market price of $9.55 represent a substantial discount to the intrinsic value of our company. We note that PMC s stated book value is over $13 and believe that the SBA and SBIC platforms have significant additional value today. Greater Illiquidity. After subtracting the proposed $5.50 special dividend, the remaining stub stock can initially be expected to be priced at $5 per share or less. With limited institutional appeal at that price and almost 98% of the pro forma outstanding stock (CIM s new shares) initially not trading, current PMC shareholders will be left with shares that we expect will be even less liquid than the existing shares. Price Overhang. The millions of shares issued to CIM in the deal (including shares issuable upon conversion of the preferred stock) will represent a massive share overhang which we expect will further depress value for current holders for the foreseeable future. We note that the terms of the deal provide that all of the shares issued to CIM, including shares we expect to be distributed by CIM, will be subject to registration rights. External Management Structure. From a longer term perspective, the external management structure contemplated for the new company results in a clear misalignment of incentives between shareholders and the external manager, which is why such structures in equity REITs have failed to attract investor interest for years. The most recent failure of the Colony American Homes offering is simply one example. Different Business. PMC shareholders are dedicated investors in a specialized mortgage REIT. The combination of CIM s growth-oriented redevelopment business and PMC s income-oriented mortgage business appears unsustainable to us in anything but the short run. We also do not believe that keeping PMC s mortgage business (at just 3% of assets) qualifies the new company as a mortgage or hybrid REIT in any way. Insufficient Yield. The 3.5% targeted yield for a pro forma company is woefully inadequate. We note the median yield of all REITs is 3.8%. This includes the top 30 REITS with long histories of stability and growth, strong share liquidity and clearly aligned incentive structures. We initially covered PCC in our April 19 and April 5 Catalyst Research Reports, highlighting REIT Redux s initial 5.5% active ownership stake ($7.65 cost basis) and its announcement that they have held unproductive discussions with management about expanding into real estate equity investments. In addition, REIT Redux announced plans to launch a website On April 16 Hoak Public Equities disclosed a 5.15% active ownership stake in PCC at $7.46/share. Hoak currently owns 5.45%. On April 22 REIT Redux disclosed it had sent a letter on April 12 proposing the appointment of 1 person as a Trust Manager. On May 17 REIT Redux sent a letter outlining a more realistic set of peer group companies for PCC to compare performance to. Also announced plans to withhold votes for director election. Hoak sent a letter to the CEO opposing the merger between PCC and CIM Urban REIT and instead suggested the Company seek a bidder above book value of $13/share. Page 8 of 12

9 PIMCO Income Strategy Fund II (PFN) Activist Investor: Brigade Capital Management Shares 1,619 Catalyst: % Outstanding 25.1% Brigade issued press release stating ISS is recommending preferred shareholders vote for its nominee Share Price Revenue Market Cap Enterprise Value Net Cash 52 wk. range EV/ Comment On July 10 Brigade Capital issued a presentation seeking to elect 1 board member for PFN s Preferred Shares Trustee (PFN has 2 preferred share Trustees). A copy of Brigade s presentation is available here: Proxy Solicitor to Brigade Capital Yahoo! (YHOO) Activist Investor: Shares 20,600,000 Catalyst: % Outstanding 1.9% Third Point is selling 66% of its ownership back to YHOO for $29.11/sh and resigning its 3 seats on the board Share Price Revenue 4.8B Market Cap 28.3B Enterprise Value 30.6B Net Cash 2.5B 1.3B 52 wk. range EV/ 22.0 On May 13, 2012 Yahoo! entered into a settlement agreement with Third Point. Under the terms of the agreement Third Point s nominees held 3 board seats on a board of 11 directors (reduced from 14). Page 9 of 12

10 CONTACT INFORMATION: Hedge Fund Solutions, LLC Damien J. Park Tel FREE Subscription to the weekly report: or The Catalyst Equity Research Report is a general circulation weekly. Hedge Fund Solutions and/or its affiliates (the Firm ) may have a consulting relationship with the companies featured in this report (the Companies ). The Firm may also actively trade in the securities of the Companies for its own account. At any time, the Firm, funds it manages and/or its employees or their family members may have a long or short position in registered or non-registered securities or in options on any such security of any company mentioned in this report. The information contained in this report is not a complete analysis of every material fact with respect to the company, industry, or security and is not an offer or solicitation to buy or sell any security. Although opinions and estimates expressed in this report reflect the current judgment of the Firm, the information upon which such opinions and estimates are based is not necessarily updated on a regular basis. In addition, opinions are subject to change without notice. The Firm from time to time may perform consulting services for companies mentioned in this report and may occasionally possess material, nonpublic information regarding such companies. This information is not used in the preparation of this report. Facts and other information contained in this report have been obtained from the public sources considered reliable but are not guaranteed in any way. Hedge Fund Solutions Portfolio of Activist Investing Products Catalyst Investment Research Daily: Alerts Weekly: Catalyst Equity Research Report Quarterly Buying Analysis Top 50 Activist Investors Specific Activist Target Catalyst Investment Research Special Reports Shareholder Activism Report & Resource Portal Download a Brochure Page 10 of 12

11 PLATINUM SPONSORS Broker-Dealer APB Financial Group is a Special Situations Brokerage Firm tailored to investors seeking fundamental value and catalyst-driven activist investments. Contact: Steven Abernathy, Principal sabernathy@abbygroup.com Tel: PLATINUM SPONSORS Legal Advisers Olshan Frome Wolosky LLP is a law firm dedicated to providing personal service tailored to the specific requirements and concerns of the firm s clients. Olshan is widely recognized as a preeminent law firm in the activist strategy area, and represents experienced activist investors, funds new to the activist area, as well as other investment and hedge funds. Olshan has extensive experience advising clients in a wide range of activist strategies, from private negotiations with management to public, high profile proxy contests, including expertly and efficiently handling litigation relating to activist matters. We also specialize in mergers and acquisitions and hostile takeovers, with extensive expertise in these matters. Olshan s highly regarded attorneys provide a full range of legal services and are uniquely positioned to provide expert advice regarding the complicated and nuanced legal issues facing activist investors today. Contact: Steve Wolosky, Partner swolosky@olshanlaw.com Tel: Schulte Roth and Zabel LLP, one of the leading law firms in the activist investing area, has been involved in some of the highest-profile campaigns facing the business world in recent years. Serving both activist-only and occasional activists, the firm advises on federal securities law, state corporate law, Hart-Scott-Rodino, proxy rules and related matters, as well as handling investigations and litigations arising out of clients' activist activity. The firm, with over 450 lawyers in offices in New York, Washington, D.C., and London, has a long history of serving private equity and hedge fund clients. Contact: Marc Weingarten, Partner marc.weingarten@srz.com Tel: Page 11 of 12

12 PLATINUM SPONSORS Proxy Advisors Alliance Advisors LLC is a multi-faceted shareholder communications firm specializing in proxy solicitation, corporate governance consulting, and information agent services. Our in-depth view of the investor communities and governance environment allows us to prepare for successful outcomes. Alliance Advisors fight team has built a distinguished reputation by successfully completing countless contested assignments. The team will complete a comprehensive analysis of the shareholder base and build a calculated battle plan accordingly. We will assist in the crafting and delivery of your message to the target audience, ensuring the message is heard and understood. Alliance Advisors consistently delivers successful outcomes to our clients. Contact: Peter Casey, Executive Vice President pcasey@allianceadvisorsllc.com Tel: Innisfree M&A Incorporated is a full service proxy solicitation/investor relations firm providing clients with sound tactical and strategic advice and results-oriented implementation in proxy and consent solicitations (whether friendly or contested), tender and exchange offers, mergers, rights offerings, strategic restructurings and other domestic and cross-border transactions requiring action by public security-holders. We provide expert consulting services on a wide range of matters, including executive compensation proposals, corporate governance issues and investor relations. Innisfree s reputation derives from our success in complex and/or contested situations. Key to that success is our ability to track, identify and understand the shifting dynamics of a company s security-holder base and provide battle-tested advice based on that information. We are convinced, and our unrivaled record demonstrates, that this refined, analytical based approach enables us to deliver the extraordinary results our clients expect. Contact: Arthur Crozier, Co-Chairman acrozier@innisfreema.com Tel: MacKenzie Partners, Inc. is a full-service proxy solicitation, investor relations and corporate governance consulting firm specializing in mergers-and-acquisitions related transactions. The firm has offices in New York City, Los Angeles, Palo Alto and London. MacKenzie's services include corporate governance consulting, security holder solicitations, information agent services for tender and exchange offers, beneficial ownership identification, market surveillance and associated financial, investor and media relations services. We work in close partnership with our client's attorneys, investment bankers and other consultants, providing advice and counsel at each stage of the transaction. Contact: Mark Harnett, President mharnett@mackenziepartners.com Tel: Page 12 of 12