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Activist Summary: Hedge Funds Are Targeting These Two Companies

Nina Zdinjak

The world of activism is always…well, active. Logically.

Looking at the current most interesting moves by activist hedge funds, Lion Point Capital, Corvex Management LP, and Sachem Head Capital Management LP come into the picture. Starting with Lion Point Capital that was launched four years ago by Didric Cederholm, who previously worked as an executive at Elliott Management Corp. Lion Point Capital is bullish on Carrizo Oil & Gas, Inc. (NASDAQ:CRZO) in which it has built a stake that accounts for 6% of the stock. More importantly, the fund is pushing for a sale or merger with another Permian driller, PDC Energy, Inc. (NASDAQ:PDCE), in which the fund also has a position. It seems that Lion Point Capital believes that an acquisition or a merger would help Carrizo Oil & Gas (CRZO) boost cash flows, while also minimizing leverage.

Carrizo Oil & Gas yesterday responded to these requests saying that it is open to all suggestions and that it is willing to evaluate them; all in the aim of providing better returns for shareholders. Over the last 12 months, Carrizo’s stock lost around 53%, having a closing price on May 6th of $11.86. The company has a market cap of $1.08 billion, and it is trading at a P/E ratio of 2.70. Lion Point Capital finds it currently undervalued, and sees a good opportunity in this potential merger for the company to gain scale.

As for Corvex Management LP, and Sachem Head Capital Management LP, they have their focus on the healthcare industry, more specifically on Centene Corporation (NYSE:CNC). Both funds are not optimistic about the company’s announced $17.3 billion acquisition of WellCare Health Plans, Inc. (NYSE:WCG) and are allegedly hoping to gain support from other shareholders who need to approve the deal. Corvex Management LP, and Sachem Head Capital Management LP actually think that Centene (CNC) could make a much better deal, like getting acquired by a company such as Humana Inc. (NYSE:HUM).

On one side, Centene’s takeover of WellCare would expand its business significantly, as the company would be able to provide its services across the entire US to around 22 million members. The broadened  company would be one of the largest in the Government-sponsored healthcare industry.

On the other side, Humana’s acquisition of Centene would expand Humana’s influence, as the company would be in charge of the biggest Medicaid managed care organization in the US. Currently, Humana is the second biggest Medicare Advantage provider.

It is still unclear whether Humana has any interested in acquiring Centene, but following these speculations Centene’s stock price gained 6.56% from Friday till Monday, having a closing price of $56.04. Nevertheless, at the same time, on Monday evening, Centene’s Marcela Hawn reaffirmed their previously announced intentions to acquire WellCare. Over the past 12 months, Centene’s and Humana’s stocks lost 3.09%, and 13.56%, respectively, while WellCare’s share price gained 18.75%.

Disclosure: None.

This article is originally published at Insider Monkey.