Harrisburg crisis

So, what's the story with Harrisburg, PA and its bonds?

The WSJ in its weekend edition said: "Officials of Harrisburg ... and the state of Pennsylvania are considering several options, including a short-term bank loan, to help the state's debt-laden capital avoid default on a general-obligation bond payment it is scheduled to make in the coming week...."

As Mr MacKay, of South Park Elementary, would put it: "defaulting is bad, mmm-kay?"

An energy incinerator project seems to be at the heart of the crisis.

The whole thing reminds me of Orange County, Calif., in 1994. Except Harrisburg doesn't have the enviable climate of Orange County.

Fiscal officials in Harrisburg can draw some comfort from this. Their chief OC counterpart, Robert Citron, never actually went to prison. He did 1,000 hours of community service, and five years of supervised probation.

Stupid time.

AuthenTec and UPEK Announce Merger

On Independence Day this year I said that UPEK "has now given up on" its efforts to merge with Authen Tec.

Authen Tec is Florida based, UPEK is a California company. They are both in the biometric identification market -- fingerprint recognition doodads and stuff.

But the merger will go forward. A friendly deal has been reached. This will be accomplished as an Authen Tec purchase of UPEK rather than, as once expected, the other way around.

The two firms have of late been adversaries in IP litigation. In May of this year, the Northern District for the District Court of California, in San Jose, issued this procedural ruling in that case. I haven't kept up with it since, but imagine that the new combined company won't continue suing itself.

Barington Capital Group

Last month the Barington Capital Group sent a letter to the bigwigs of Ameron Int'l Corp. advising Ameron to rationalize and refocus its portfolio.

Ameron (NYSE: AMN), a company based in Pasadena, Calif., producers of water transmission lines and fabricated steel products, such as wind towers; fiberglass-composite pipe for transporting oil, chemicals and corrosive fluids and specialized materials; and products used in infrastructure projects.

As for Barington, we've encountered them once before.

The letter was addressed James S. Marlen, the Chairman and CEO of Ameron. It said that Ameron has unused potential that is being ignored due to its leading market positions, attractive end markets, valuable joint ventures and a healthy, asset-rich balance sheet.

On March 31, Marlen replied, in what sounds like passive-aggressive fashion. "While we wholeheartedly agree with you that Ameron's stock is undervalued given its long list of positive attributes, which include leading market positions, attractive end markets, valuable affiliations and a healthy, asset-rich balance sheet, we disagree with many of your theories as to why Ameron is undervalued. We look forward to discussing these positive attributes with Barington and all of our valued shareholders in the future."

Presumably, then, they do not think that their portfolio of products is inadequately focused.

Principal Place of Business

Recently, in Hertz Corp. v. Friend, the US Supreme Court has unanimously endorsed the so-called "nerve center" test for determining what is a corporation's "principal place of business."

This is an important question in terms of access to the federal courts on a "diversity" rationale. A natural person is deemed to have only one state of residence for purposes of diversity jurisdiction. A corporation is deemed to be a resident of any state in which it is chartered and of the state that is its principal place of business. What does this mean? There has been what the law firm Blank & Rome has called a "cacophony of approaches," circuit by circuit, and SCOTUS now wants to turn this into more of a melody.

In the instant dispute, Friend et al. sued Hertz in a California state court seeking damages for what they claimed were California's wages and hopurs laws. Hertz, presumably believing it would receive better treatment in federal court, sought to remove the issue to same on ground of diversity of citizenship. The federal district court in California refused to take the case. It said Hertz was a citizen of California, so there was no diversity.

SCOTUS has now reversed that, finding that Hertz' nerve center is in New Jersey, so it may get into federal court.

The meaning of the phrase "principal place of business" is also a contested one in the context of bankruptcy, as SCOTUS observed.

Here's a quite recent illustration of that fact.

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."

Eastbourne sells stake in Amylin

Eastbourne Capital, one of the shareholders who waged a proxy contest over Amylin Pharmaceuticals earlier this year, has sold its entire stake in that company, according to an SEC filing.

There are twelve seats on the Amylin board. Five of them were up for grabs at the meeting in May. The dissidents won two of those five.

Amylin, a San Diego based pharma company (NASDAQ:AMLN), focuses on drugs for the treatment of diabetes and obesity.

Dissidents have expressed frustration with some of the deals Amylin's management has cut, especially a partnership with giant Eli Lilly.

The stock price was between $11 and $11.50 at the time of that annual meeting. It rose in subsequent weeks, getting as far as $15.50 in early August, though the price has lost some of those gains since. Even with the recent slide, the stock price has considerably outperformed the Nasdaq-100 index in recent months.

This news made me curious about the size of the market for diabetes treatments. A little googling discovered the abstract of a book on the subject, INNOVATIONS IN THE MANAGEMENT OF DIABETES published last year.

The abstract begins: "Diabetes has become the fifth leading cause of death across developed markets, and cases of the disease are forecast to grow by 7.1% across the globe by 2013. The market for innovative diabetes treatments will be driven by this projected rise in prevalence, together with the substantial unmet need for drugs that can effectively halt or reverse disease progression. Although extended lifecycle management for existing antidiabetic therapies may offer sales growth in the short term, the development of new drugs from novel classes will become increasingly important in the future."

CNS Response

The CNS/Brandt saga continues. CNS Response is a California based company that develops software designed to analyze a patient's brainwaves.

You may remember that back in July there was some excitement when the company's former CEO, Leonard Brandt, purported to call a spaecial shareholders meeting in a hallway outside of a closed office door in Dover, Delaware.

Now there's a new installment of the soap opera. Brandt -- who, BTW, is a current director of the company as well as its former CEO -- called another meeting for the Friday before Labor Day weekend and the company says that this one didn't count either.

Gee, this sounds like an operation that has its act together. I'd surely want to invest my money with them!

Meanwhile, while you and I make our portfolio decisions, the family feud is in litigation before Delaware Chancery Court as explained in this 8K.

Adrenalina proxy fight resolved

Pacific Sunwear, the Anaheim, Calif. based clothing retailer aimed at teens and young adults, announced that Adrenalina has withdrawn its slate, ending a proxy context for control of PacSun's board of directors.

Adrenalina, remember, is the Florida based company that calls itself the "extreme store." It is headed by Ilia Lekach.

Lekach met PacSun's leading independent director and other bigwigs, and after the meeting all was sweetness and light. Or as Lekach said in a statement, he "appreciated the opportunity to meet with [Peter Starrett] ... and to communicate my ideas for strenghtening PacSun's business."

Adrenalina has not had a great year (see the stock chart above) and it is possible they are fortunate PacSun resisted their embrace -- they might have had a tough time raising the money they would have needed to pay off on last year's bid had it been accepted.

Three brief items

1. Microchip Technology says that it has plans to wage a proxy battle for control of Atmel, and has announced seven nominees for the board of directors.

Atmel, a company headquartered in San Jose, Calif., manufactures microcontrollers, advanced logic, mixed-signal, nonvolatile memory and radio frequency (RF) components.

Microchip made an unsolicited bid to acquire Atmel in late October and was rebuffed. This week's announcement is in response.

2. RA Capital Healthcare Fund, a hedge fund with a biotech focus, is urging the board of Northstar Neuroscience Inc. to make a cash distribution to its shareholders or to implement a share buy-back program.

Northstar, based in Seattle, Wash., makes medical devices, especially a system that delivers targeted electrical impulses, "cortical stimulation," to the brain for what the company's website describes as "investigatory purposes."

RA Capital's letter is mostly limited to "urging" a course of action. There is no real "or else" clause because RA seems to be aware that it isn't in much of a position to forcefully re-direct corporate policy.

3. Whatever you might want to say about Marc Dreier, the lawyer who was caught impersonating a pension plan official last week, you can't argue with his timing. If one is going to be caught in stupid high-level criminality, one should make sure that it is squeezed between Gov. Blago's arrest on the one side and the follies d'Madoff on the other.

For those who have forgotten Dreier and thus aren't sure what I'm talking about ... well, that's the point. And here's a reminder.

Rectifier Update

International Rectifier has set the date for its annual meeting.

I last wrote about IRF in September. Since that time, the price of the stock has dropped steadily, from the neighborhood of $20 to that of $12.

Yes, everybody else has been dropping during that priod, too, but not as severely. If we round out the period in which we're interested to an even three months, the math is easier (or, tobe frank, the Nasdaq site will do the work for me).

IRF has lost 44.9% of its value over three months. The Nasdaq 100 has lost 31.4% of its value. The DJIA has suffered comparatively little, -22.5%.

Anyway, the IRF has set the date: January 9, in Los Angeles, California.

I had thought, in September, that there would be a challenge slate. But it now appears that the challenge didn't materialize, that the two members of the board up for re-election are running unopposed.

On the other hand (the "good news" for fans of conflict), it does appear that the meeting will consider a proposal to de-classify the board.

Sirius XM

Michael Hartleib believes that the management of Sirius XM has been unjustly enriching itself at the expense of its shareholders.

This raises the question: "Who is Michael Hartleib?" Other than the fact that he's the subject in the lead sentence above, I can't find that he "is" anybody whose name most of us should recognize.

Still, he has taken two actions worthy of note in this place. He has created a group called SaveSirius with the idea of waging a proxy fight, and he has filed a derivatives lawsuit in a federal court in California.

SaveSirius has sent formal letters of demand to the SIRIUS XM directors. It demands, specifically:

* postponement of the vote that is seeking shareholder approval to further dilute the common stock by increasing the number of shares in the fully diluted float from 4.5 billion to 8 billion.

* postponement of the proposed reverse split, ranging from 1 for 10 to 1 for 50.

* immediate suspension of all stock compensation plans and other bonuses.