John Paulson's move on Cadbury

Hedge fund Paulson & Co, run by 2007 highest-paid manager John Paulson, has lifted its stake in Cadbury Plc to 2.54% according to a regulatory filing released on Wednesday. On Tuesday, Paulson increased the stake in Cadbury to 2.08%, buying 14.8 million shares. In addition to Paulson & Co., Eton Park Capital Management and York Capital Management topped up on Cadbury, which is the subject of a hostile bid by U.S. food group Kraft.

Paulson, who earned billions with savvy bets during the credit crisis, loaded up on shares in London Stock Exchange in 2007 when it was under offer by Nasdaq. The expectation was that Nasdaq would have to make a higher offer, or that another suitor would emerge. Contrary to his rather unsuccessful move at the LSE his speculation on a higher buy out price of German chemical company Celanese AG by Blackstone proved right.

Paulson also is not unknown as an activist in Europe. In 2007 he and London-based Centaurus Capital pressed Dutch retailer Ahold N.V. to divestment its U.S. business and concentrate on the more lucrative European operations.

Einhorn likes German defense company and specialty chemicals

In Greenlight Capital’s Third Quarter Investor Letter David Einhorn laid open some of his favourite stocks, i.e. the long positions of his fund. Among the new initiation is German Rheinmetall AG, a technology group for defense equipment and automotive components based in Duesseldorf. According to Einhorn’s analysis the projected earnings for 2010 justify the whole current market capitalisation, implying the value for the automotive part is given away for free.

Also, German specialty chemical company Lanxess AG, an investment showing up in previous investor letters, is even one of the Funds biggest 5 long positions. Greenlight fund are up between 4.8%-7% and gained 22.9%-30.0% year-to-date.

Gamco’s Gabelli pushes for sweeter bid on Cadbury

Gabelli, whose New York-based Gamco Asset Management Inc holds a 1.05 percent stake in Cadbury, told Reuters on Monday that some investors in the market were quoting 820 pence as an acceptable price for a sweetened bid on the company.

Cadbury has repeatedly rejected Kraft's 10.2 billion pound cash-and-shares proposal made in early September and the UK Takeover Panel has given the U.S. food group a deadline of November 9 to come up with a firm bid or walk away for six months.

Source: Reuters

Wyser-Pratte looking for large discounts at European companies

Guy Wyser-Pratte told Reuters, that he is looking at fresh targets, mostly conglomerates. The 69-year-old French-born US citizen said the period of “hunkering down” is over after the credit crunch and the market meltdown forced many activists to remain at the sidelines.

As markets recover he is shifting from defence to “looking at companies with large discounts to their restructured potential value”, the founding father of activist investing told the media.

His company, Wyser-Pratte Management Co., has an impeachable track record at attacking European companies, though he insists that two-thirds of his roughly 70 initiatives since 1991 were resolved in a friendly manner.

Knight Vinke targets Italian oil & gas giant ENI

US Activist investor Eric Knight calls for separating out Eni’s gas activities. This would solve the undervaluation of the company.

ENI is valued at about €69bn. Knight’s suggestion of splitting its oil and gas assets into two companies, would release up to €50bn of hidden value, giving the combined parts a valuation of roughly €120bn.

Knight Vinke is not unknown to big European companies. He targeted HSBC, Suez and Royal Dutch Shell. Its most successful attack was on Shell in 2004 and led the company to abandon its Anglo-Dutch corporate structure.

Knight got some shareholder's support for his proposals. The Ontario Teachers’ Pension Plan welcomes the debate; “There are benefits to the various stakeholders, including shareholders but also customers, from ENI considering changing its structure.”

A big factor is the Italian state, which has a 30 per cent stake. Rome is unlikely to agree to any radical shake-up of ENI, according to bankers and analysts in Milan, considering the company’s status as a “national champion”.

Activists have a poor track record at Italian companies. In 2007 Algebris Investments, an UK hedge fund, tried to change corporate governance at the country’s largest insurer Generali. Hermes undertook similar efforts at cement maker Italcementi. Neither Algebris nor Hermes succeeded.

Atticus closes two of its three funds

Atticus Capital, the NY-based Hedge Fund returns about $3bn to shareholders when closing down two funds. The $1.2bn European Fund, however, will be managed furthermore.

In Germany Atticus became famous when attacking Deutsche Börse together with Chris Hohn’s TCI in 2007. At that time the fund managed close to $20bn.

Atticus’s light-hedged strategy was hit hard in 2008 losing 25 percent. The current year did not do any better, losing 6 percent when most of the hedge funds rebounded.

Founder and Chief Executive Timothy Barakett named solely personal reasons for the shut down. He said that he would pursue philanthropic interests and is going to found a foundation.

15 years ago Atticus was formed with just $6 million. Over the lifetime, the flagship fund, Atticus Global, returned 19 percent a year (after fees) according to Barakett.

Mario Gabelli at the Financial Analyst Seminar

I dug up a speech of famous value investor Mario Gabelli held at the Financial Analyst Seminar of the CFA Institute. (Here is the connection to my recent occupation. See last posting!) He speaks about Corporate Governance, Poison Pills and his fight against them. Also he touched on the subject of activists briefly.

Gabelli is not very well known in Europe – his company GAMCO Investors primarily invests in the US - but it is worth listening to his comments (on CNBC for example) to grasp his investment approach.

Here you can listen to or download his presentation.