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A Look Into Billionaire Tom Sandell’s M&A and Activist Bets For 2016

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Sandell Asset Management is a private, alternative asset management firm founded by Tom Sandell in 1998. This New York-based fund specializes in “global corporate event-driven, multi-strategy investing with a strong focus on equity special situations and credit opportunities,” according to its website. The investment firm has recently filed its 13F filing with the SEC, revealing an equity portfolio valued at more than $362.6 million held as of the end of December. It should be noted that its portfolio was worth $644.7 million at the end of the third quarter and its value fell as the fund liquidated several positions. During the fourth quarter, the fund’s 22 long positions in companies with market caps above $1.0 billion delivered a weighted average loss of 1.5%, while for the full 2015, these long holdings posted a weighted average loss of 1.9%. In this article, we’ll take a look at five of Sandell’s top stakes held at the end of December.

Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient (see more details about our small-cap strategy).

Akorn, Inc. (NASDAQ:AKRX)

– Shares Owned by Sandell as of December 31: 490,744

– Value of Holding as of December 31: $18.31 Million

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Akorn, Inc. (NASDAQ:AKRX) saw its stock price surge more than 30% over the fourth quarter of 2015, as the stock caught the attention of investors and analysts, and speculations arose about a possible takeover. However, the stock slid by 33% since the beginning of the year, even though the company posted better-than-expected results for the fourth quarter. According to a statement from Akorn, the Audit Committee of its Board of Directors has recently concluded an investigation into its accounting practices and the company said that no fraud or misconduct was found. Another investor bullish on the company is Scott Ferguson’s Sachem Head Capital, which last disclosed ownership of 4.35 million shares.

Airgas, Inc. (NYSE:ARG)

– Shares Owned by Sandell as of December 31: 152,970

– Value of Holding as of December 31: $21.15 Million

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During the fourth quarter, Sandell initiated a stake comprising 152,970 shares of Airgas, Inc. (NYSE:ARG), a mid-cap supplier of industrial, medical and specialty gases, and hard goods. During the fourth quarter, there was plenty of chatter about a planned acquisition of the company and in November, Bloomberg reported that French rival Air Liquide was offering $13.4 billion or $143 per share to purchase Airgas. The merger talks increased Airgas’ stock price to $138 from $96. While it is not clear if Sandell acquired the stock before or after the spike, it still looks like a smart investment; year-to-date, the shares have gained 2.3%. Other funds that started new positions in the company during the fourth quarter included Alec Litowitz And Ross Laser’s Magnetar Capital, which bought 1.06 million shares, and Shane Finemore’s Manikay Partners, which acquired 675,000 shares.

Viavi Solutions Inc (NASDAQ:VIAV)

– Shares Owned by Sandell as of December 31: 3.57 Million

– Value of Holding as of December 31: $21.76 Million

Viavi Solutions Inc (NASDAQ:VIAV)’s stock is trading almost flat since the beginning of August, when JDSU spun off its Communications and Commercial Optical Product business segment and renamed itself into Viavi Solutions, which concentrated the company’s Network Enablement, Service Enablement and Optical Security and Performance Products segments. In early-September, Sandell revealed a 5.2% activist stake in the company, and plans to transform it into a serial acquirer, pretty much like Jarden Corp (NYSE:JAH). However, as the stock remained range-bound over the fourth quarter, Sandell Asset Management disposed of 1.49 million shares, or almost 30% of its stake in the company. Similar was the case of George Soros’ Soros Fund Management, which trimmed its exposure by 3% over the fourth quarter, but still kept a large stake, comprising 10.1 million shares.

On the next page we will take a look into two more top picks from Sandell’s equity portfolio.

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