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Activists Can Be Deal-Breakers, Too

We're all familiar with the classic textbook play by activist shareholders, the one involving taking a stake in a company, prompting management to explore strategic alternatives and -- if all goes to plan -- ending up with a fat premium from a sale.

Less common, but not unheard of, is the case where these shareholders oppose a deal and call for it to be scrapped altogether rather than altered or improved. That's what makes the efforts from hedge funds and occasional activists Eminence Capital and Hudson Bay Capital Management to squash Sabra Health Care REIT Inc.'s takeover of larger REIT Care Capital Properties Inc., notable.

The arguments of Eminence and Hudson Bay, which together own 7.1 percent of Sabra, have merit. The key drawback to the deal is that Sabra, which had been focused on the better-performing sector of senior housing, is re-upping its exposure to skilled-nursing facilities. The latter is an industry where profits are flailing and demand has slid, mainly because of changes to...