Three brief items

1. Deal Struck at Landry's

Landry's Restaurants Inc., a seafood chain operation, says that Pershing Square Capital Management has agreed to drop its resistance to the buyout of tghe company by its chief executive, Tilman Fertitta.

In order to obtain this agreement, as you mnight expect, Feritta had to sweeten his offer for the 45 percent of the shares of Landry's (LNY.N) that he doesn't already own, up from $24 a share to $24.50 a share. The bidding was at $14.75 a share back in November.

Pershing Square and related entitied own together a little less that 10 perecent of the outstanding shares.

2. Incumbents win at First Franklin

Two incumbent board members at First Franklin Corp., of Cincinnati, Ohio, the holding company for Franklin Savings and Loan Co., have held on to their seats despite a challenge from Lenox Wealth Management Inc.

Also, a nonbinding referendum on the declassification of the board failed to muster the necessary majority.

This fight illustrated one common feature of proxy fights that I believe I have so far left largely undiscussed on this blog: the disputes over what constitutes the relevant peer group. One commonly hears dissidents challenge a management on the theory that it has failed to keep pace with the performance of similarly placed corporations, the peer group. One often hears management deny that assertion -- by defining itself against another peer group.

In this case, Glass Lewis used a small list of other banks as a peer group and came to the conclusion that First Franklin is even with the pack. RiskMetrics used a larger group and said First Franklin is lagging behind.

3. Chesapeake Energy: Say on Pay

A vote at the June 11 annual meeting of the shareholders oif Chesapeake Energy ended with 55.6 percebt approval of a resolution that would provide for regular shareholder advisory votes on executive pay.

Chesapeake, an oil company that, despite a name that smacks of the Atlantic Ovcean, is actually based in Oklahoma City, Oklahoma.

The board of directors' argument against say-on-pay had been the rather lame contention that the company and its shareholders should wait and see what Congress will come up with this year. Or, to quote:

Because the Board is unable to predict whether federal legislation will be enacted or the form it might take, the Board believes that it would be premature for the Company to implement an advisory shareholder vote on executive compensation prior to knowing the ultimate disclosure requirements of the Stability Act or any other federal legislation pertaining to say-on-pay.

I'm not surprised that an argument like THAT failed to carry the day!

Biglari says, "Don't look at us!"

Biglari Holdings Inc., the corporate alter ego of Sardar Biglari, has announced that it has "absolutely no involvement in Denny's Corporation .... Without our approval, both parties' references to our company, including its subsidiaries, contain misinformation. However, we do not intend to correct any of these errors."

S. Biglari has been chairmnan of the board of Western Sizzlin' Corp. since March 2006, its CEO since May 2007. There is talk that he considers himself a restaurant business deal-maker extraordinaire, and that he could be tempted to make a move on Denny's.

What is simple fact is that Denny's is facing a proxy challenge, and that the challengers have argued: "The weaknesses of Denny's management have forced us to seek changes to the board in the interest of all shareholders. If the status quo is maintained, we are deeply concerned that the Company's future will mirror its past."

RiskMetrics agrees with some of the contentions of the dissidents, writing that in its analysis that Denny's has been a long-term underperformer "compared to IHOP in terms of the restaurant footprint, revenue growth and [same store sales ("SSS")] metrics. Denny's total unit count has declined since the current management took charge in 2001."

The incumbents reply: "Although they profess to want to work with the Board, none of the dissident nominees have ever spoken to the Company or made legitimate efforts to discuss their views or learn about the Company’s strategy and plan."

The dissidents want the company to reduce capiutal expenditues by $10 million. The company charges that in essence they've pulled that number arbitrarily out of their bunghole. (Okay, the filings with the SEC don't exactly put it that way. I'm paraphrasing.)

Sierra Geothermal

Sierra Geothermal Power Corp. (TSX: SRA) is what one might guess it is from that name. The company, based in British Columbia, Canada, has been developing geothermal energy products located in Nevada and California.

The company's website says that it "intends to finance development by utilizing a combination of corporate equity, joint venture partnerships and project debt, with the support of US government grants and loan guarantees."

Dissidents led by Richard Rule, and a company he controls (Exploration Capital Partners) seeks to change the size of the board in a way that would put majority control up for grabs. They are unhappy with the existing board's efforts to remain independent, at a time when similar companies are consolidating.

At this time, RiskMetrics is supporting the incumbents. That proxy advisory company says, "The board has the right strategy of becoming a major independent producer of geothermal power. Two future milestones: (i) 50 MW bankable feasibility by the end of 2010 and (ii) power production by 2012, have been conveyed to the market. $20 million out of the $50 million required for (i) have been secured. A future financing plan has also been outlined. There is no contrary evidence to prove Sierra is not on track now."

Three brief items

We're in the thick of proxy fight season. We'll do our best to keep up.

1. One of the founders of Amylin Pharmaceuticals, Howard Greene Jr, has said recently that he will vote for the dissident slate at that company's annual shareholder's meeting May 27.

"There needs to be a fresh wind blowing through the boardroom,” Greene told an interviewer. "I think our science and technology is first in class. . . . On the other hand, the last few years have shown that our commercialization of that has been pretty disappointing.”

The dissident slate is a combination of Icahn and Eastbourne nominees, and the combination itself was made possible by an SEC no-action letter.

2. SEC proceeds against David E. Hurley

Hurley, an investment adviser, has settled a case brought against him by the SEC, which charged him with violating SEC rules pertaining to proxy voting by failing to describe his investment company's proxy voting policies and procedures to its clients properly.

Hurley was the chief operating officer of Intech, a firm that it appears routinely voted its proxies in accord with AFL-CIO recommendations, in the hope of getting a high ranking in that organization's "Key Votes Survey," which in turn was expected to help Hurley/intech attract new union-affiliated clients and keep its existing clients of that sort happy.

But, says the SEC, Intech's "written policies and procedures did not addresss material potential conflicts that may have arisen between Intech's interests and those of its clients who were not pro-AFL-CIO."

3. A closed-end real estate fund -- meeting May 20.

RiskMetrics Group has recommended against the liquidation proposal that will be up for debate at the special meeting of shareholders in DWS RREEF Real Estate Fund Inc. on May 20.

Here's a press release on the subject.

DWS is a closed-end real estate fund. What, you might ask, does that mean? A closed-end fund generally does not continuously offer its shares for sale and its shares are not redeemable, except perhaps at stated internals. As a consequence, the value of these shares on the secondary market can often trade at a discount on the funds' net asset value. When that discount becomes large, pressure to iquidate often develops, which is what is happening here.

The May 20 meeting may tell us something about the extent of push-back we're goiing to be seeing at what I take it is the bottom of a business cycle: push-back against such liquidation proposals.

Three brief items

No real common thread here. Just three observations.

1. Cape Fear [not the movie].

Cape Fear Bank Corporation announced yesterday that it has reached agreement with a group of investors led by Maurice Koury about reconstituting its board of directors.

The two biggest advisory services rather forced their hand in this. RiskMetrics (ISS) supported two of Koury's nominees: James S. Mahan III and Mort Neblett. Glass Lewis also supported two: Mr. Mahan and David Lucht.

Under the settlement, the reconstituted board will include each of those three gentlemen, as well as another Koury nominee: Scott Sullivan.

The company likely knew a challenge was coming as soon as it reported, back in April, that it had identified material weaknesses in its internal controls over financial reporting. Glass Lewis' report said: "We believe such material weaknesses may signal weak internal accounting expertise, poor internal controls, and aggressive financial reporting practices at the company."

2. CME/Nymex

Both of the two sets of shareholders involved have now voted in favor of a deal that has CME Group acquiring the New York Mercanrtile Exchange for $7.6 billion. The two exchanges said in a statement that they expect to close on the deal by the end of this year.

The board of directors of CME will be expanded to included three directors from Nymex.

Brad Hintz, an analyst at Sanford Bernstein, is being quoted today thus: "CME wants this so badly because the futures market is ... one of the few monopolies left in the world. And it's a monopoly because they have their own clearing operation."

I beg to differ. It isn't a monopoly, although I do understand the point that the vertical link between an exchange and a clearing operation creates or enhances market power.

3. AIG returns to UK subprime.

American International Group has become the first US based party to subprime mortgage market in the United Kingdom.

Specifically, AIG has agreed to fund the launch of a non-conforming lender, Link Loans, through its subsidiary, Ocean Money.

So reports FTAdviser this morning, in a story by Joe McGrath.

To what does a nonconforming lender not conform? Is this someone who wears long hair and stays ahead of the curve on drug use? No ... that would be a nonconformist. A different matter. A nonconforming lender is a non-bank institution that offers loans to creditors who wouldn't meet the standards of a bank.

Is such activity about to pick up again, a little more than a year after the big chill began? Or is the AIG action an arrant outlier? For now, I'm guessing the latter.

CSX Update

I'm beginning this post while listening to music in my right ear.

I'm on hold as a teleconference is about to begin, sponsored by RiskMetrics. They've brought together representatives from both sides of the TCI/CSX dispute.

FT Alphaville, helping with the hype, has said that this will be a first, "a pixelated and very public showdown between CSX, a container and logistics group, and its activist hedge fund tormentors, TCI and 3G Capital."

On the dais for the railroad, its chairman Michael Ward, its CFO Oscar Munoz, and others.

For the hedge funds: Snehal Amin, founding partner at TCI, and Alexandre Behring, Managing Director at 3G, etc.

Christopher Young will moderate (or referee if it gets good!). He's the head of mergers and acquisitions research at RiskMetrics.

I'm not going to try live blogging. I'll let you know my impressions in tomorrow's entry here, though.