Nelson Peltz

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The company which has lately is best known as Amazon's physical showroom, aka Best Buy, is in play once again, this time on yet another highly dubious speculation of a takeover by the company's founder, Richard Schulze, who has offered to take the company private at $24-26/share. So far so good. The problem: a highly confident letter by Credit Suisse meaning zero fixed financing is in place. Frankly, it is surprising Jefferies did not engage here, because as those who have observed the kinds of "weak" MBO offers as this one will certainly be, "highly confident" financings almost never work out, especially those which assume to refi $1.7 billion in debt for a distressed company. It gets better: Schulze has not even done due diligence for which he is asking the board's permission. Expect the initial pop on the headline to fizzle very quickly the realization that the probability of this deal actually happening is negligible (see every other "highly confident" take over by Trian's Nelson Peltz virtually all of which have fizzled in the past 3 years).

After close today, Trian Fund Management, Nelson Peltz' asset management company, filed a 13D indicating the fund had amassed a 10 million (7.9%) share stake in FDO, and more importantly, expressed a vague, preliminary, non-binding and highly-contingent interest in acquiring discount retailer Family Dollar (closing regular hours at $44). As the proposed price indicated in the letter is $55-60, the shares are expectedly surging, meaning the letter alone resulted in nearly a 20% ($13) gain for Peltz 10 million share investment: $130 million for a few minutes worth of work: not bad. Yet is this anything more than a red herring? After all these kinds of fully contingent letters were all the rage during the bubble years, when funds would "express a purchase interest" with so many contingencies Arnold could drive his Hummer through all the "outs." As soon as the stock surged, the letter writer (and more often than not, the cabal of silent co-investors) would cash out, and slowly the buying interest would evaporate, with the price slowly dropping back to historical levels. In fact, for Trian this is not the first time - the company did an almost identical thing with Chemtura back in 2008, only to completely leave the company in March of 2009, months ahead of CEM's filing for bankruptcy (resulting in major losses for Trian). Which is why we urge readers to be very careful before chasing into FDO stock here: we are very concerned that this is nothing more than simply another attempt on behalf of Trian to stir up buying interest in which to sell its 10mm holdings with no real acquisition interest, since with all the non-binding clauses it is extremely difficult to take this letter seriously.

What are the top hedge funds buying and selling?

Is Bill Miller headed for retirement? Today's action in Legg Mason stock, which was down 10%, the most since May 2009, sure indicates investors may have had enough of the permabullish, pro-cyclical portfolio manager. The reason for the dramatic drop in stock price: accelerating outflows.

What is there to say about the endless barrage of insider sales that hasn't been said for 9 straight months before. Insiders are selling into the neverending rally, as domestic mutual funds have no equity inflows, yet stocks somehow miraculously keep rising, providing yet more attractive exit price points for directors and insiders. In the past week insiders bought $18 million worth of stock and sold $419 million. There is no way to spin this data. There were no notable buyers, while Nelson Peltz was vacating HNZ shares with a vengeance, selling $30 million worth of the canned food maker. Ralph Lauren also apparently wasn't too hot on Polo's Spring/Summer collection.

2010 has started off with a bang. Insiders purchased $4.5 million worth of stock (and yes, this does not include the end year transaction by such individuals as Nelson Peltz who acquired nearly 10 million shares of Legg Mason on the last day of 2009), in the period from January 4. It should, however, comes as no surprise that in the same period selling did not moderate, and insiders offloaded $281 million in shares (yes, this accounts for double counting between various corporate entities). Net result: an insider selling to buying of 62x to kick off 2010. And still the quants are chasing momentum ever higher. There is no way this will end in anything but tears.

Nelson Peltz, who at one point had held high hopes for flame retardant plastics maker Chemtura, has had enough. His proxy on Chemtura's board, Ed Garden, a Vice Chairman of Peltz's Trian Fund Management, announced on Friday he was resigning from the Board of Directors.

Nelson Peltz, who at one point had held high hopes for flame retardant plastics maker Chemtura, has had enough. His proxy on Chemtura's board, Ed Garden, a Vice Chairman of Peltz's Trian Fund Management, announced on Friday he was resigning from the Board of Directors.

And y'all thought Lyondell is going to be the only spectacular chemical LBO bankruptcy. The list is long and focuses mostly on plastics makers: Ineos, Chemtura and Georgia Gulf. The third-largest producer of polypropylene sealed its fate in 2005 when it bought BP's Innovene unit for $9 billion. Net debt most recently was $9.7 billion, 4.3x more than LTM EBITDA according to CFO John Reece. Of course there is the matter of plummeting EBITDA... Doubt leverage will be there for long time.