Randall Smith‘s Alden Global Capital has initiated a major stake in Fred’s, Inc (NASDAQ:FRED) and has become the company’s largest shareholder. According to regulatory filings dated December 22, the fund has acquired 9.27 million shares of the pharmacy chain, amassing 24.8% of its outstanding stock. The fund has also expressed its intention to engage in discussions with the management of Fred’s with regard to governance, strategic plans and a proposed acquisition.
On Tuesday, December 20, Fred’s, Inc (NASDAQ:FRED) stock shot up by 81% after the company announced it would acquire the 865 stores that Rite Aid Corporation (NYSE:RAD) needs to dispose of in order to finalize its merger with Walgreens Boots Alliance Inc (NASDAQ:WBA). This deal would more than double the size of Fred’s operation. According to the Wall Street Journal, Alden Global Capital, made a quick 14% profit in the process, as it was quietly buying up the stock. The fund’s management kept on buying the stock even after the surge in price and considers it to still be undervalued.
In response to Alden’s moves, the company’s management has a adopted shareholders’ rights plan, also known as poison pill, in order to “ensure that the Board remains in the best position to perform its fiduciary duties and enable all Fred’s Pharmacy shareholders to receive fair and equal treatment.” The company said it adopted the plan after “unusual and substantial activity” in its shares.
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Fred’s, Inc (NASDAQ:FRED) had 650 stores at the end of October and has pledged almost all its assets to contract $1.65 billion in loans in order to finance the acquisition, which is expected to cost approximately $950 million. Following the recent jump, Fred’s shares are now up by roughly 22% for the year. Billionaire Ken Griffin‘s Citadel Investment Group held126,425 shares worth $1.14 million at the end of September. In its latest 13F filing, Jim Simons’ Renaissance Technologies reported a fresh investment in the company, having acquired 27,850 shares during the third quarter.
You can access the original SEC filing by clicking here.
Ownership Summary Table
Name | Sole Voting Power | Shared Voting Power | Sole Dispositive Power | Shared Dispositive Power | Aggregate Amount Owned Power | Percent of Class |
---|---|---|---|---|---|---|
Strategic Investment Opportunities | 9,275,000 | 9,275,000 | 9,275,000 | 24.8% | ||
Alden Global Capital | 9,275,000 | 9,275,000 | 9,275,000 | 24.8% | ||
Heath Freeman | 9,275,000 | 9,275,000 | 9,275,000 | 24.8% |
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Page 1 of 10 – SEC Filing
(Name, Address and Telephone Number of Person
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Page 2 of 10 – SEC Filing
1 | NAME OF REPORTING PERSON Strategic Investment Opportunities LLC | ||
2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP | (a) o (b) o | |
3 | SEC USE ONLY | ||
4 | SOURCE OF FUNDS WC | ||
5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) | ¨ | |
6 | CITIZENSHIP OR PLACE OF ORGANIZATION Delaware | ||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH | 7 | SOLE VOTING POWER – 0 – | |
8 | SHARED VOTING POWER 9,275,000 | ||
9 | SOLE DISPOSITIVE POWER – 0 – | ||
10 | SHARED DISPOSITIVE POWER 9,275,000 | ||
11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 9,275,000 | ||
12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES | o | |
13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 24.8% | ||
14 | TYPE OF REPORTING PERSON OO |
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Page 3 of 10 – SEC Filing
1 | NAME OF REPORTING PERSON Alden Global Capital LLC | ||
2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP | (a) o (b) o | |
3 | SEC USE ONLY | ||
4 | SOURCE OF FUNDS AF | ||
5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) | ¨ | |
6 | CITIZENSHIP OR PLACE OF ORGANIZATION Delaware | ||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH | 7 | SOLE VOTING POWER – 0 – | |
8 | SHARED VOTING POWER 9,275,000 | ||
9 | SOLE DISPOSITIVE POWER – 0 – | ||
10 | SHARED DISPOSITIVE POWER 9,275,000 | ||
11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 9,275,000 | ||
12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES | o | |
13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 24.8% | ||
14 | TYPE OF REPORTING PERSON IA, OO |
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Page 4 of 10 – SEC Filing
1 | NAME OF REPORTING PERSON Heath Freeman | ||
2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP | (a) o (b) o | |
3 | SEC USE ONLY | ||
4 | SOURCE OF FUNDS AF | ||
5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) | ¨ | |
6 | CITIZENSHIP OR PLACE OF ORGANIZATION USA | ||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH | 7 | SOLE VOTING POWER – 0 – | |
8 | SHARED VOTING POWER 9,275,000 | ||
9 | SOLE DISPOSITIVE POWER – 0 – | ||
10 | SHARED DISPOSITIVE POWER 9,275,000 | ||
11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 9,275,000 | ||
12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES | o | |
13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 24.8% | ||
14 | TYPE OF REPORTING PERSON IN |
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Page 5 of 10 – SEC Filing
Item 1. | Security and Issuer. |
Item 2. | Identity and Background. |
| (i) | Strategic Investment Opportunities LLC, a Delaware limited liability company (“Opportunities”); |
| (ii) | Alden Global Capital LLC, a Delaware limited liability company (“Alden”), as the investment manager of Opportunities; and |
| (iii) | Heath Freeman, as the President of Alden. |
Item 3. | Source and Amount of Funds or Other Consideration. |
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Page 6 of 10 – SEC Filing
Item 4. | Purpose of Transaction. |
The Reporting Persons intend to engage in discussions with the Issuer’s management and board of directors, other stockholders of the Issuer, and other interested parties regarding, without limitation, the Issuer’s recently announced agreement to acquire 865 stores and certain assets of Rite Aid Corporation as well as the Issuer’s operating performance, capital allocation, governance, board composition, and strategic plans.
Item 5. | Interest in Securities of the Issuer. |
A. | Opportunities |
| (a) | As of the close of business on December 22, 2016, Opportunities beneficially owned 9,275,000 Shares. |
| (b) | 1. Sole power to vote or direct vote: 0 |
| 2. Shared power to vote or direct vote: 9,275,000 |
| 3. Sole power to dispose or direct the disposition: 0 |
| 4. Shared power to dispose or direct the disposition: 9,275,000 |
| (c) | The transactions in the Shares by Opportunities during the past 60 days are set forth in Schedule A and are incorporated herein by reference. |
B. | Alden |
| (a) | Alden, as the investment manager of Opportunities, may be deemed the beneficial owner of the 9,275,000 Shares owned by Opportunities. |
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Page 7 of 10 – SEC Filing
| (b) | 1. Sole power to vote or direct vote: 0 |
| 2. Shared power to vote or direct vote: 9,275,000 |
| 3. Sole power to dispose or direct the disposition: 0 |
| 4. Shared power to dispose or direct the disposition: 9,275,000 |
| (c) | Alden has not entered into any transactions in the Shares during the past 60 days. The transactions in the Shares on behalf of Opportunities during the past 60 days are set forth in Schedule A and are incorporated herein by reference. |
C. | Mr. Freeman |
| (a) | Mr. Freeman, as the President of Alden, may be deemed the beneficial owner of the 9,275,000 Shares owned by Opportunities. |
| (b) | 1. Sole power to vote or direct vote: 0 |
| 2. Shared power to vote or direct vote: 9,275,000 |
| 3. Sole power to dispose or direct the disposition: 0 |
| 4. Shared power to dispose or direct the disposition: 9,275,000 |
| (c) | Mr. Freeman has not entered into any transactions in the Shares during the past 60 days. The transactions in the Shares on behalf of Opportunities during the past 60 days are set forth in Schedule A and are incorporated herein by reference. |
| (d) | No person other than the Reporting Persons is known to have the right to receive, or the power to direct the receipt of dividends from, or proceeds from the sale of, the Shares. |
| (e) | Not applicable. |
Item 6. | Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer. |
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Page 8 of 10 – SEC Filing
Item 7. | Material to be Filed as Exhibits. |
| 99.1 | Joint Filing Agreement by and among Strategic Investment Opportunities LLC, Alden Global Capital LLC and Heath Freeman, dated December 21, 2016. |
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Page 9 of 10 – SEC Filing
Strategic Investment Opportunities LLC | |||
By: | Alden Global Capital LLC Investment Manager | ||
By: | /s/ Heath Freeman | ||
Name: | Heath Freeman | ||
Title: | President |
Alden Global Capital LLC | |||
By: | /s/ Heath Freeman | ||
Name: | Heath Freeman | ||
Title: | President |
/s/ Heath Freeman | |
Heath Freeman |
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Page 10 of 10 – SEC Filing
Shares of Common Stock Purchased/(Sold) | Price Per Share($) | Date of Purchase/Sale |
200,000 | 9.5115* | 11/28/2016 |
75,000 | 9.6214* | 11/29/2016 |
50,000 | 9.8926* | 11/30/2016 |
125,000 | 9.9886* | 12/01/2016 |
30,000 | 10.1470* | 12/02/2016 |
50,000 | 9.8951* | 12/05/2016 |
170,000 | 10.4733* | 12/06/2016 |
430,000 | 10.7045* | 12/07/2016 |
70,000 | 10.6169* | 12/08/2016 |
200,000 | 10.6227* | 12/09/2016 |
280,000 | 11.0585* | 12/12/2016 |
120,000 | 11.1038* | 12/13/2016 |
122,000 | 11.0004* | 12/14/2016 |
78,000 | 11.1550* | 12/15/2016 |
570,000 | 11.3505* | 12/16/2016 |
43,606 | 15.7032* | 12/20/2016 |
443,253 | 17.0331* | 12/20/2016 |
407,615 | 17.8313* | 12/20/2016 |
401,877 | 19.0302* | 12/20/2016 |
1,818,960 | 19.8091* | 12/20/2016 |
715,811 | 20.7764* | 12/20/2016 |
148,878 | 21.4910* | 12/20/2016 |
925,000 | 20.0728* | 12/21/2016 |
1,800,000 | 19.3622* | 12/22/2016 |