Hedge Funds As Breakers, Not Makers, Of News

Date: Tuesday, July 8, 2008
Author: Joseph Checkler, Dow Jones Newswires

NEW YORK -(Dow Jones)- Hedge funds hate to see their names in the headlines, but lately, they've been the ones breaking the news about companies they invest in.

Daniel Loeb's Third Point LLC disclosed in a Monday regulatory filing that Maguire Properties Inc. (MPG) had received a buyout offer for about $20 a share, a level the stock hasn't traded at since March. Third Point's disclosure sent shares of Maguire, a real-estate investment trust, up more than 15% early in the day to above $14, before it fell back with the rest of the market. The bid turned out to be for $20.25 a share by a private company, Pacific Office Properties, The Wall Street Journal reported later Monday.

The filing by Third Point, which owns 8.8% of Maguire shares, wasn't the first of its kind. In late May, 24% Calpine Corp. (CPN) holder Harbinger Capital Partners disclosed in an open letter that NRG Energy Group Inc. (NRG) had made an $11 billion offer to Calpine, an offer that Calpine later rejected. At a time when activist investors are trudging through a bear market along with the rest of the investment community, hedge-fund activists are getting more involved in trying to fetch buyout offers, and in many cases they appear to be communicating with the would-be buyers.

In its SEC filing, Third Point said it was "in receipt of a letter indicating that a viable third party recently approached the company with a proposal to acquire all of the outstanding shares of the company." Third Point also said that Maguire had rejected Pacific Office's offer, although it didn't name the bidder in its letter. Loeb's fund went on to say that it would be in shareholders' best interest for "the company to assist the acquirer, and any other viable bidder who may surface, in preparing for a premium offer for the company." A Third Point spokeswoman said the company would not comment beyond its filing.

Third Point switched to activist from passive investor in Maguire back in early April, after Maguire had announced it would no longer explore a sale of the company. Apparently, the lack of progress was what prompted Third Point to disclose the third-party bid.

Activist investors like Carl Icahn and William Ackman have found recently that even their strategy isn't immune to a bear market. Icahn's attempts to get Yahoo Inc. (YHOO) to sell itself to Microsoft Corp. (MSFT), as well as losing proxy battles in Biogen Idec Inc. (BIIB) and Motorola Inc. (MOT), have so far been the opposite of lucrative. Ackman's activist investments in several companies, including Borders Group Inc. (BGP) have also lost money.

An SEC spokesman said the commission doesn't have rules that prohibit investors from voluntarily disclosing information in 13D filings, as long as the information is accurate.

- By Joseph Checkler, Dow Jones Newswires; 201-938-4297; joseph.checkler@ dowjones.com