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 December 13, 2013 SYMBOL COMPANY INVESTOR BANC Banc of California Patriot Financial Partners BEE Strategic Hotels & Resorts Cascade Investment BOBE Bob Evans Sandell Asset Management DFZ R.G. Barry Cover Street Capital FNF Fidelity National Financial Corvex Capital GIVN Given Imaging Discovery Capital HA Hawaiian Holdings Hirzel Capital HH Hooper Holmes Cannell Capital HZNP Horizon Pharma Discovery Capital PLXT PLX Technology Discovery Capital RCMT RCM Technologies IRS Partnership/Legion Partners SEV Sevcon, Inc. GAMCO Investors SLTM Solta Medical Voce Capital HEDGE FUND SOLUTIONS (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. HEDGE FUND SOLUTIONS 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 Banc of California (BANC) Activist Investor: Patriot Financial Partners 1,509, % On December 10 Patriot disclosed a 7.7% active stake in BANC Share Price M 239M Enterprise Value -81M 404M N/A 52 wk. range EV/ N/A Strategic Hotels & Resorts, Inc. (BEE) Activist Investor: Cascade Investment 13,240, % On December 12 Cascade (Bill Gates' private fund) agreed to acquire the Four Seasons Resort Punta Mita from Not Avail BEE for $200M Share Price M 1.8B Enterprise Value 3.4B -1.3B 174M 52 wk. range EV/ 19.6 On July 20, 2009 Vector Holdings (a part of Vector Group tobacco company; Ticker: VGR) announced they had acquired 7% of BEE s shares outstanding since early June (Vector does not currently hold a position). In addition, Vector stated that they acquired the shares with a view towards influencing material business decisions relating to the future of the Company. In early March 2013, following BEE s poor earnings announcement, Orange Capital issued a statement further pressing the company to sell itself. In the statement, Orange stated, The company has made numerous arrangements that have entrenched and enriched management at the expense of shareholders. In a letter to the Company on February 1 Orange Capital stated that a sale would likely result in proceeds of $11-14 per share. Orange Capital s letter to BEE on February 1, 2013: BEE responded saying it strongly disagrees with certain assumptions and conclusions outlined in the communication. On November 20 Orange Capital (4.0%) announced it is nominating 4 to BEE's board. Orange also launched a website and issued a shareholder presentation which can be found here: Continue to Next Page Page 3 of 12

4 Bob Evans Farms, Inc. (BOBE) Activist Investor: Sandell Asset Management 1,730, % On December 9 Sandell announced its intent to commence a consent solicitation and issued a presentation to BOBE shareholders. Share Price B 1.3B Enterprise Value 1.6B -209M 166M 52 wk. range EV/ 9.4 A copy of Sandell s Unlocking Shareholder Value presentation is available here: On the same day BOBE responded saying it has thoroughly vetted Sandell s ideas with the help of its financial advisor Lazard and concluded they are not in the best interest of shareholders. A copy of BOBE s December 9 response is available here: We initially covered BOBE on September 23 when Sandell sent a letter to BOBE outlining its proposals for increasing value, consisting of (i) the separation of its packaged foods business, BEF Foods, through a sale or a spin-off to stockholders; (ii) the entry into a sale-leaseback transaction to realize the significant real estate value associated with the owned restaurant properties; and (iii) the launch of a large, one-time self-tender for the Common Stock. A copy of Sandell s Sept. 23 letter is available here: A copy of Sandell s presentation is available here: On November 11 Sandell sent a letter to the Board expressing their extreme concern at the Board s inaction regarding their ideas to deliver increased shareholder value and indicating that they have retained a proxy solicitation firm to provide advice regarding options available to them, including a possible consent solicitation A copy of Sandell s November 11 letter is available here: On December 6 Sandell increased its ownership from 5.1% to 6.5% Legal counsel to Sandell Asset Management Proxy Solicitor to Sandell Continue to Next Page Page 4 of 12

5 R.G. Barry Corp. (DFZ) Activist Investor: Mill Road Capital 613, % Not Avail Cove Street increased its ownership in DFZ from 4.2% to 5.4% Share Price Mill Road (currently a 9.6% shareholder with a $15.91/sh cost basis) sent a letter to DFZ on January 28, 2009 offering to purchase the Company at a cash price of $7.00 to $7.75 per share. 142M On September 11, 2013 Mill Road offered to purchase DFZ for $20.00 per share. 219M Enterprise Value 219M 0 22M 52 wk. range EV/ 10.1 On September 25 Cove Street Capital (4.2%) sent a letter to the board of DFZ requesting they hire an investment bank to evaluate strategic alternatives, including a sale to Mill Road On October 2 Mill Road sent a letter to DFZ's Chairman reassuring him of Mill Road's ability to fund the going-private transaction for $20/share. A copy of Mill Road s October 2 letter is available here: Fidelity National Financial (FNF) Activist Investor: Corvex Capital 18,285, % Corvex announced it is pleased with the Company's decision to explore strategic alternatives Share Price B 6.8B Enterprise Value 7.2B -378M 1.01B 52 wk. range EV/ 7.2 We initially covered FNF on October 30 when Corvex disclosed a 7.0% "active" stake (through 2.8M shares and the rest in call options) and disclosed it is supportive of management's strategy. Legal counsel to Corvex Capital Given Imaging, Ltd. (GIVN) Activist Investor: Discovery Capital 1,175, % On December 8 GIVN announced Covidien will acquire it for $30/share in cash Share Price M We initially covered GIVN on October 1 when Discovery sent a letter to GIVN requesting they (1) implement a $50 million share repurchase or dividend to take advantage of Israel s expiring Trapped Profits Law and (2) pursue a subsequent sale of the Company to a larger strategic buyer that will recognize the Company s inherent strengths and value. 951M Enterprise Value 556M 120M 25M 52 wk. range EV/ 22.3 A copy of Discovery s October 1 letter is available here: Page 5 of 12

6 Hawaiian Holdings (HA) Activist Investor: Hirzel Capital Management 5,661, % On December 13 HA announced it had reached an agreement with Hirzel to add one individual to its member board. Share Price B 463M Enterprise Value 758M -321M 170M 52 wk. range EV/ 4.45 A copy of the settlement agreement is available here: On October 10 Hirzel sent a letter to HA seeking a board seat. Hooper Holmes Inc. (HH) Activist Investor: Cannell Capital 10,681, % 0.56 Cannel increased its "active" stake from 14.2% to 15.24% Share Price 0.50 We initially covered HH on April 19, 2010 when Regan Partners (at the time a 5.02% shareholder) sent a letter to the board expressing its dissatisfaction with the CEO and recommending the board conduct a review of the senior management. 145M 36M Enterprise Value 33M 4M -9M 52 wk. range EV/ Negative On October 10 Cannell Capital changed from a "passive" to "active" investor and sent a letter to the board requesting (i) reduced board compensation and (ii) they consider "going-dark" to save costs. Horizon Pharma, Inc. (HZNP) Activist Investor: Discovery Capital 6,244, % 3.82 Discovery increased its "active" stake from 8.4% to 9.5% We initially covered HZNP on August 13, 2012 when Discovery disclosed a 7.5% active ownership stake. Share Price M 442M Enterprise Value 435M 13M -58M 52 wk. range EV/ Negative On May 14 Discovery increased its "active" ownership from 7.5% to 8.4% Page 6 of 12

7 PLX Technology Inc. (PLXT) Activist Investor: Discovery Capital 2,841, % 5.26 On December 13 Discovery increased its "active" stake from 5.2% to 6.2% Share Price M 298M We previously covered PLXT in several Catalyst Research Reports, initially highlighting Balch Hill Capital s 9.7% active ownership stake and their statement that management should seek a buyer for the Company to take advantage of the tremendous market interest in the Company s PCI Express switches, and particularly its Gen3 switches. Enterprise Value 282M On March 7, 2012 Balch Hill nominated seven people for election to PLXT s board at the 2012 annual meeting. 11M 7M 52 wk. range EV/ 43.3 On March 13 Balch Hill sent a letter to the board suggesting that the board s ill-advised and poorly executed acquisition strategy is directly responsible for destroying shareholder value. In addition, PLX stated, We believe a reconstituted Board focused on reviewing all strategic options for the Company, including a sale of the Company is the best option for creating value for all stockholders of the Company. On April 16 we reported that Seligman Spectrum Focus Fund disclosed a 5.03% active ownership stake. On May 3, 2012 we reported that Balch Hill withdrew its nomination notice to elect 7 people to the board following PLXT s April 30 announcement that the Company is to be acquired by IDT for $7.00 per share in stock and cash. That deal collapsed on December 19, On January 25 Potomac Capital sent a letter to PLXT demanding the Company immediately commence a thorough review of all strategic alternatives to the Company. On March 6 Potomac Capital nominated 5 for election to PLXT s board. Potomac increased its ownership from 5.33% to 6.4% On June 17 Potomac increased its ownership from 6.4% to 8.2% (cost basis of $4.33/share). On June 27 Potomac sent a Demand Letter requesting to inspect the Company's books and records as it relates to the examination of strategic alternatives. On September 13 we reported that Discovery Capital had increased its ownership and disclosed a 5.2% "active" stake with a $5.05/sh cost basis On October 25 Potomac sent a letter to shareholders seeking support for its nominees. A copy of Potomac s Oct. 25 letter is available here: On November 12 Potomac (currently a 10.3% shareholder) sent a letter to shareholders seeking support for its slate of 3 nominees. A copy of Potomac s shareholder letter is available here: On December 6 Potomac announced ISS support for its 3 nominees for election to the board at the December 18 annual meeting. Legal counsel to Potomac Capital Legal counsel to Balch Hill Capital Proxy Solicitor to PLX Technology Page 7 of 12

8 RCM Technologies Inc. (RCMT) Activist Investor: Legion Partners/IRS Partnership No. 19 L.P. 1,641, % 5.36 IRS Partnership /Legion obtained the 2 board seats it was seeking at RCMT's December 5 annual meeting Share Price M 84M We initially covered RCMT in our January 20, 2012 Catalyst Research Report, highlighting Michael O Connell s 5.1% active ownership stake and his plans to speak with the Company about ways to increase value, including engaging with the Company on a review of its strategic activities, assessment of its organization, management of its balance sheet, the pursuit of other corporate transactions and board representation. Note: Michael O Connell is associated as a 13D group investor with IRS Partnership No. 19 Enterprise Value 69M 14M 8M 52 wk. range EV/ 8.75 On January 2 IRS nominated 2 people for election to the board at the 2013 annual meeting. In addition, IRS submitted proposals to (i) declassify the board, (ii) adopt a majority vote standard, and (iii) adopt a policy to ensure the Chairman is an independent director. On March 12 IRS increased its active stake in RCMT from 9.8% to 10.7% On May 15 IRS called on RCMT to set its annual meeting date. On October 28 IRS Partnership filed a proxy statement seeking to elect 2 directors and separate the Chairman and CEO position. A copy of the definitive proxy statement is available here: Also on October 30, IRS Partnership sent a letter to shareholders highlighting the need for change. A copy of the October 30 letter is available here: On November 7 Legion Partners sent a letter to RCMT shareholders discussing the CEO's false academic credentials, poor shareholder returns, and poor compensation practices. A copy of Legion s November 7 letter is available here: On November 12 IRS/Legion sent a letter to RCMT shareholders asking them to stay focused on the real issues in the director election contest. A copy of the IRS/Legion November 12 letter is available here: IRS/Legion also issued a shareholder presentation discussing "A Case for Change" A copy of the IRS/Legion shareholder presentation is available here: On December 2 IRS/Legion issued a press release announcing its willingness to accept a settlement with RCMT which includes two of its nominees on a board that expands by 1 member; IRS/Legion will also forgo its expense reimbursement if the CEO voluntarily relinquishes his excessive compensation package. RCMT declined the offer. Legal counsel to IRS Partnership No. 19 Proxy Solicitor to RCM Technologies Page 8 of 12

9 Sevcon, Inc. (SEV) Activist Investor: GAMCO Investors 1,228, % Not Avail On December 13 GAMCO nominated 3 individuals for election to the SEV board. A copy of GAMCO s nomination notice is available here: Share Price M 18M Enterprise Value 17M 0-0.4M 52 wk. range EV/ Negative We initially covered SEV on November 27 when GAMCO announced plans to nominate 2 individuals to the SEV board. Solta Medical, Inc. (SLTM) Activist Investor: Voce Capital Not Avail Not Avail Valeant agrees to acquire SLTM for $2.92/share in cash Not Avail Share Price M 235M Enterprise Value 190M -19M 2M 52 wk. range EV/ 77.4 We previously covered SLTM on May 8 highlighting a letter Voce sent to the Board opposing a share authorization and, instead, recommending a sale of the Company. On June 5 shareholders voted down the Company s proposal to increase the number of authorized shares from 100million to 200million. Voce Capital sent a letter to SLTA demanding the formation of a special committee to examine a sale. Voce also insisted that no current Director is a credible candidate to replace the CEO and urged the board to pursue a sale instead of filling the position with a new CEO. A copy of Voce s July 19 press release is available here: On August 14 Voce sent a letter to SLTM's board expressing its disappointment on the appointment of a board member as interim CEO and renewed its demand that they sell the company. A copy of Voce Capital s August 14 letter is available here: Legal counsel to Voce Capital 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 375 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: David Rosewater, Partner david.rosewater@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