Now It's Hedge Fund vs. Hedge Fund

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What's most unusual about the brewing battle over Acxiom is that it pits two hedge funds with a history of shareholder activism against each other. Two years ago, ValueAct, a $5 billion San Francisco fund led by Jeffrey Ubben, was a thorn in the side of Acxiom's management. The company's board twice rejected takeover offers from Ubben's fund in 2005, which back then was proposing to buy the company for $25 a share.

Ubben then launched a proxy battle to elect three directors to the company's board. But last summer the activist manager and Acxiom's management made peace. In a deal announced last August, Ubben got a seat on the board and ended his proxy challenge.

At the time, Ubben said he planned to "deliver significant long-term value to all Acxiom shareholders." Lifflander takes a cynical view, saying that Ubben and Acxiom's management have gotten too close. "They've gone from fighting to hugging to actual marriage," he says.

Better Days Ahead

Yet there's a lot of optimism to Lifflander's view about Acxiom shares being undervalued. The $3 billion buyout offer for Acxiom, which includes the assumption of $756 million in debt, represents a 14% premium to the price at which the stock closed on May 16. Shares of Acxiom, which traded as high as $43 in late 2000, have been stuck in a narrow trading range for much of the past five years.

On the same day it announced the buyout, Acxiom reported a modest 4.7% rise in sales for its just completed fiscal year, which ended Mar. 31. Full-year earnings rose 10.3%, to $70.7 million, or 84 cents a share. Investment firm UBS (UBS) is advising the buyers in the deal and is expected to provide some of the financing, sources say.

Still, the company is projecting much better days ahead. It's looking for a 21% gain in earnings per share, to $1.08 in the current fiscal year. Indeed, that rapid earnings growth is fueling Lifflander's opposition to the deal.

Using the company's own projections, Millbrook calculates that the buyers are getting Acxiom at a price that's 7.1 times its EBITDA, or earnings before interest taxes, depreciation, and amortization—a popular way of measuring a company's profitability.

That's much lower than the EBITDA multiple being paid this year by private equity buyers for other information services companies, according to Thomson Financial. Millbrook's opposition to another hedge fund is unusual, but he may gain some traction.

Matthew Goldstein is an associate editor at BusinessWeek, covering hedge funds and finance.