Large Abitibi-Consolidated (ABY) Holder Third Avenue Management Is Against The Merger with Bowater

In a 13D filing on Abitibi-Consolidated Inc. (NYSE: ABY) after the close Friday, 12.44% holder Third Avenue Management noted they changed their filing status from 13G (passive) to 13D (active), saying the combination with Bowater (NYSE: BOW) is not in the best interest of shareholders.

The firm said they have no plans to solicit proxies from the company's shareholders.

In January, Abitibi-Consolidated and Bowater announced a definitive agreement to combine in an all-stock merger of equals.

Third Avenue Management Changes Filing Status on Handleman (HDL) to 13D, Notes 15.6% Stake

In a 13D filing Friday on Handleman Co. (NYSE: HDL), 15.6% holder (3.16 million shares) Third Avenue Management LLC noted they changed their filing status from 13G (passive) to 13D (active). Third Avenue Management held 3.02 million shares of HDL at the quarter ended December 31, 2006.

In a pretty standard disclosure, Third Avenue Management said they may seek to meet with the board of directors and/or members of senior management or communicate publicly or privately with other stockholders or third parties to indicate its views on issues relating to the strategic direction undertaken by the Issuer and other matters of interest to stockholders generally. As part of any such discussions, they may suggest changes in, or take positions relating to, the strategic direction of the Issuer as a means of enhancing shareholder value.

Third Avenue Management Looks For Changes at Pogo Producing (PPP)

In a 13D filing after the close Monday on Pogo Producing Co. (NYSE: PPP), Third Avenue Management disclosed a 6.2% stake (3.6 million shares) in the company. The firm disclosed a letter to the company expressing their dissatisfaction with the company and its CEO.

In the letter the firm said, "we are notifying you that we are actively considering the various alternative courses of action with respect to our investment as described in item 4 of our recent Schedule 13D filing, which we may undertake alone or with others, in an attempt to generate a better return for TAM as well as for all of Pogo's shareholders."

Some changes the firm may propose includes: changes in the composition of the board of directors or management, including an increase in the size of the board of directors or in the nominees offered to fill any then existing vacancies on such board, changes to the certificate of incorporation or bylaws, changes in the capitalization or dividend policy, the acquisition or disposition of additional securities of the company and the sale of material assets or another extraordinary corporate transaction, including a sale transaction.

NOTE: Pogo Producing is also the target of activist investor Dan Loeb through his Third Point LLC hedge fund.

A Copy of the Letter:

Dear Mr. Van Wagenen:

Third Avenue Management LLC ("TAM"), on behalf of its advisory clients, currently owns 3.6 million common shares of Pogo Producing Company("Pogo"), representing a 6.2% ownership interest. We have been Pogo shareholders for approximately three years. TAM's philosophy is to investin strongly financed and well-managed companies, and we are typically long-term supportive shareholders. When we originally invested in Pogo, itmet our stringent investment criteria. However, during the three years thatwe have been shareholders, we have become increasingly disappointed with Pogo's operating performance and with your performance as CEO.

Particularly disconcerting is the deterioration in the company's financialposition. As the table below indicates, since 2003 net debt has increased by more than six times and net debt per mcfe of proved reserves has increased by more than five times. While we believe that the debt load is manageable, the apparent strategy of levering up during a period of historically high commodity prices is troubling.

In addition, the company's operations appear to have deteriorated markedly during the last three years. Production per share has dropped by more than 20%. On a unit of production basis, lease operating expense has increased by 178% and G&A has tripled. It is difficult to find a peer company whose operating costs have escalated as rapidly and to the high level that Pogo'shave. Although some increase in operating costs would have been understandable, given industry-wide cost inflation and hurricane related costs and production delays, the magnitude of these increases is alarming.

This combination of higher debt, lower production, higher operating costs,and the underwhelming results from your recent acquisition of NorthrockResources appear to have driven the poor relative performance of Pogo's stock over the last three years. Since the end of 2003, Pogo's stock is down 1% while the S&P Midcap Oil and Gas Exploration and Production Indexis up 78%. In May 2006, Moody's acknowledged the company's deterioration by downgrading Pogo's Corporate Family Rating to Ba3 from Ba2 citing "risingunsustainable reserve replacement costs, inconsistent production trends,and a sharp decline in organic reserve replacement."

It is readily apparent from the numbers contained in the chart below that Pogo is clearly in need of stronger leadership and a new strategic direction.

TABLE

Despite Pogo's poor performance over the past several years, your compensation has been rising. In 2005, you received an 11.8% increase in your base salary and your bonus grew by 25%. You also received a restricted stock award valued at approximately $2 million, up 55% compared to 2004. We believe that if Pogo's compensation structure were tied more closely to performance, these significant increases would not have occurred. These increases are even more concerning because they serve to increase the already overly generous termination provisions of your employment agreement, which provides, among other things, that in the event of a termination due to a change of control, you will receive lump sum payments of five years' salary and bonus plus an amount equal to four times the fair market value on the grant date of your most recent equity award.

We have no doubt that the value of Pogo and its business is substantial. To date, however, you have not been able to maximize shareholder value. It is clearly time for a change in direction. As a result, we are notifying you that we are actively considering the various alternative courses of action with respect to our investment as described in item 4 of our recentSchedule 13D filing, which we may undertake alone or with others, in an attempt to generate a better return for TAM as well as for all of Pogo's shareholders.

Sincerely,

Curtis Jensen

Portfolio Manager, Co-Chief Investment Officer

Ian Lapey

Portfolio Manager

Large Electro Scientific (ESIO) Holder Nierenberg Investment Comments on Proposals to Enhance Shareholder Value

In an amended 13D filing on Electro Scientific Industries Inc. (Nasdaq: ESIO) 11.6% holder Nierenberg Investment Management comments on their proposal that the company put excess cash to work to maximize shareholder value. The firm also commented on yesterday's proposal from ESIO's largest shareholder, Third Avenue Management LLC, which was advocating a combined share repurchase and dividend program.

From the 'Purpose of Transaction' section of the filing:

Our proposal that ESIO put excess cash to work to maximize shareholder value seems to be progressing. We cite three recent developments to illustrate our point.

First, and foremost, we thank ESIO's management and Board of Directors for their constructive and timely announcement yesterday reiterating their commitment to enhancing shareholder value. We know that ESIO is working to prepare it ssubstantive response to our suggestions. As current and former public company board members ourselves, we appreciate that doing this the right way takes time. We are prepared to be patient while good people do the right thing.

Second, we note the Schedule 13D filed earlier today by ESIO's largestshareholder, Third Avenue Management LLC. We particularly note the thoughtfulletter from Third Avenue's Co-Chief Investment Officer, Curtis R. Jensen, toESIO's CEO, Nick Konidaris, advocating a combined share repurchase and dividend program to improve ESIO's return on equity (ROE) and tangibly demonstrate the company's commitment to maximizing shareholder value. Though Third Avenue's suggestions differ from those in our last 13D, we think they have improved our original ideas.

Third, we note with enthusiasm today's announcement that United Microelectronics Corp. (UMC), which is Taiwan's second largest contract chip manufacturer, will use its excess cash to retire fully 30% of its outstanding shares and pay shareholders a one time cash dividend. Taiwanese technology companies ares howing American technology companies how to use cash to build shareholder value.

In conclusion, we would like to update the Schedule 13D to disclose that in two separate recent conversations we have told ESIO's CEO and Board Chairman that we do not require the company to use a one time cash dividend as the only or principal way to return excess cash to the shareholders. As Mr. Jensen's letter points out so powerfully, there are other perfectly acceptable ways to use excess cash to build shareholder value. If, for example, ESIO's Board and advisors were to conclude that the best way to improve ROE were to repurchase shares, we could support that decision with just two conditions. First, we would want the size of the repurchase program to be large enough that it would meaningfully boost both ROE and earnings per share, like we believe UMC's program will. And, second, we would like ESIO to make a continuing commitment to use excess cash flow to repurchase a significant percentage of shares on an ongoing basis. To illustrate the size of programs which could be acceptable tous, we could support a one time repurchase of six million shares, which is over 20% of the outstanding share count, succeeded by a continuing program to repurchase at least onemillion more shares annually.

The previous statements by the Reporting Persons to their views regarding their investment in ESIO represent solely their own analyses and judgments, based on publicly-available information and their own internal evaluation thereof. Those statements are not intended, and should not be relied on, as investment advice to any other investor or prospective investor. To the extent those statements reflect assessments of possible future developments, those assessments are inherently subject to the uncertainties associated with all assessments of future events; actual developments may materially differ as a result of circumstances affecting ESIO and/or extrinsic factors such as developments inthe company's industry and the economic environment. The Reporting Personsreserve the right to change their internal evaluation of this investment in thefuture , as well as to increase or decrease their investment depending on theire valuation, without further amending their Schedule 13D except as required by applicable rules.

Electro Scientific (ESIO) Largest Shareholder Recommends One-Time Dividend and Long-Term Buyback

In a 13D filing on Electro Scientific Industries Inc. (Nasdaq: ESIO), the company's largest shareholder, Third Avenue Management LLC (14.4%), noted they changed their filing status from 13G to 13D. The firm sent a letter to CEO expressing their thoughts and recommendations regarding possible share repurchases and/or extraordinary dividends as a means of returning value to the Issuer’s stockholders. In the Letter, the firm stated that it believes that if the Issuer were to consider a return of capital to its shareholders, that some combination of a one-time dividend and a committed, long-term share repurchase program would effectively balance the needs of the Issuer and those of the outside passive shareholders (like Third Avenue Management).

In the letter, the firm said, "Were the Board to consider a return of capital to shareholders, as I suggest it does, my sense is that some combination of a one-time dividend (say $2 per share) and a committed, long-term share repurchase program would effectively balance the needs of the corporation and those of the outside passive shareholders like TAM."

NOTE: Another large Electro Scientific shareholder, Nierenberg Investment Management, has been pushing the company to issue a special one-time cash dividend.

A Copy of the Letter:

Dear Nick,

It was a pleasure meeting recently with you, John and Craig. In the spirit of being constructive, I wanted to share some thoughts and recommendations regarding our conversation on share repurchases and extraordinary dividends as a means of returning value to shareholders. As you know at September 30, 2006 Third Avenue Management (“TAM”) owned 4.5 million shares of Electro Scientific Industries’ common stock (“ESI Common”). TAM has been a long-term and supportive shareholder. While uninterested in short-term stock price performance, we remain a keen observer of the business. We believe the company remains overcapitalized, and that a return of capital, in some form, ought to be considered very seriously.

From the TAM point of view, the facts, observations, and recommendations are these:

•
Our preference is for management to use excess resources in the business to grow the per share value of the business. Only if management concludes that it is not likely to use that surplus capital in such a manner should it consider returning that capital to shareholders (i.e., the corporation comes first);

• A strong balance sheet is a competitive advantage, and is especially critical in cyclical industries like the ones in which the company participates;

• In the 10 years we have owned ESI Common, the company has never made a large acquisition using either cash or stock, and has carried large cash balances during the entire period, suggesting that the company does, indeed, have an element of surplus capital;

• The company’s operations have - over the course of several business cycles - been self-funding;

• In the past few years the company appears to have earned less than 4% on its portfolio of cash and securities, which comprise nearly one-half of the company’s assets. While net interest income appears to be rising, it makes little economic sense to retain so much capital earning sub par returns;

• A committed share repurchase program requires management to make a judgment about the value of its share price since, presumably, management will not pay more than “fair value” for its shares or more than the company is worth. Share repurchase programs are most effective when management acts opportunistically in this regard;

• As the attached analysis suggests, the benefits of a long-term share repurchase program likely accrue more to long-term holders of ESI Common, in the form of higher reported EPS and the avoidance of taxes at the shareholder level, in contrast to a large, one-time dividend whose benefits would benefit even short-term oriented investors;

• A share repurchase program and an extraordinary dividend almost certainly carry different “signals” to the market (i.e., share repurchases suggest undervaluation of the shares, a dividend may connote limited growth opportunities);

• A share repurchase program can be implemented in various forms, including Open Market Purchases, Fixed Price Tender Offers, Dutch Auction Tender Offers and Privately Negotiated Transactions;

• A share repurchase program, in contrast to a one-time dividend, may be modified in the case of a prolonged industry downturn, or should an extraordinary growth opportunity present itself, and the company needs capital;

• Were the company to need capital, it appears that it has the requisite and properly-oriented shareholder base that might participate in a rights offering, a cost effective, quick and shareholder friendly approach to capital raising;

• Given the company’s extensive international business, it’s not clear how much of the company’s cash resides outside the United States and how much would need to be repatriated in order to pay a large dividend. On the surface it does not seem to make sense to pay U.S. taxes on repatriated funds simply to return capital to shareholders;

• It’s likely that a large, one-time extraordinary dividend would correlate with a smaller market capitalization. Less clear, perhaps, is the effect of a long-term share repurchase program on the company’s market capitalization;

• A share repurchase program, if large enough, may adversely affect share liquidity, in contrast to a dividend, which would have no such effect on the stock, per se.

Were the Board to consider a return of capital to shareholders, as I suggest it does, my sense is that some combination of a one-time dividend (say $2 per share) and a committed, long-term share repurchase program would effectively balance the needs of the corporation and those of the outside passive shareholders like TAM.

Should you wish to discuss these ideas further, please don’t hesitate to contact me.

Sincerely,

Curtis R. Jensen

Co-Chief Investment Officer