Robert Millard and Realm Partners’ Merger Arbitrage Returns

Realm Partners is a multi-strategy, event-driven hedge fund that was launched in July 2009 by the former directors of Lehman Brothers. Robert Millard, 60 years old, has a vast 35+ years of career at various companies, including senior positions at Lehman Brothers and Barclays Bank. Before launching Realm, Millard was the head of Global Trading Strategies Group at Lehman. Robert Millard joined Lehman in 1978 when the company he worked for, Kuhn Loeb & Co., was acquired by Lehman. Tony Stone, a former managing director at Lehman and a graduate of NYU’s Stern School of Business, is another partner of Realm. Arthur Estey, 57 years old, is also among the partners of Realm. Realm Partners is based in New York and Douglas Andrew Spiegel is the CFO of the fund. Between 2004 and 2009, Spiegel was the CFO of Sanno Point Capital Management.  Spiegel currently serves as the CFO of Realm Partners and is responsible for the fund’s investment operations as well as its reporting requirements.

Alpha Natural Resources, Inc. (NYSE:ANR)

Below is a list of Realm Partner’s latest reported trading activities:

One of the strategies used extensively by Realm is merger arbitrage. For example, Realm trippled its Beckman Coulter (BEC) ownership in the first quarter of 2011, buying up almost 326K shares. Danaher Corp. (DHR) agreed to acquire BEC for $83.50 per share in cash in the first quarter of 2011. Realm was not the only fund that was investing in BEC. James Dinan’s York Capital Management bought almost 2.7 million shares of BEC in the first quarter of this year and increased its BEC ownership by 732%. Matthew Halbower’s Pentwater Capital Management was another fund that more than trippled its BEC ownership in the first quarter.

A similar story happened with Massey Energy (MEE), where Realm bought 1.3 million shares in the first quarter of 2011. Alpha Natural Resources (ANR) acquired Massey for a record premium in the first quarter of 2011. According to the terms of the merger, MEE shareholders are to receive 1.025 shares of ANR and $10 in cash for each MEE share. MEE shares were trading between a low of $39 and a high of $49 in the first quarter of 2011 where ANR shares were trading between a low of $50 and a high of $67. ANR shares were recently trading at $45.55 a share. Matthew Halbower increased his MEE ownership by 246% in the first quarter of 2011.

Realm also invested in Genzyme which was acquired by Sanofi-Aventis for $74 a share. John Bader’s Halcyon Asset Management increased its GENZ ownership by 368% in the first quarter of 2011. Likewise, Thomas Stayer’s Farallon Capital increased its ownership by 152%, owning 6.7 million shares valued at $512 million at the end of March.

Among the major M&A that Realm Partners has benefited from was the acquisition of Smurfit Stone Container Corp (SSCC) by RockTenn Corp in a 50% cash 50% stock deal, valuing SSCC at $35 a share (which represented a 27% premium).

Unfortunately imitating Realm’s portfolio didn’t provide amazing returns to monkey investors recently. Realm’ Partners’ top stock picks returned 1% since the end of March, vs. 2% return for the SPY.

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