THE LONE RAIDER

Unless you run an underperforming mid-size Canadian company or income trust, the name George Armoyan might not scare you.

But if your business is on the ropes and Armoyan calls up to request a meeting, you'll want to freshen up your resumé. Yves Simard, the CEO of the ailing swimwear chain Groupe Bikini Village, was well aware of Armoyan's reputation when he arrived at the retailer's HQ outside Montreal one day this past spring. The chain was facing an uncertain future as one of the remnants of the collapsed clothing retailer Les Ailes de la Mode, brainchild of Montreal entrepreneur Paul Delage Roberge.

Simard chuckles as he recalls his nervousness prior to the four hours of meetings he and Roberge had with Armoyan. "It was not the earthquake that we expected, but [Armoyan] dropped on the table what he had to drop," says Simard.

Over the past three years, the 47-year-old Armoyan has been on a tear, seizing control of a dozen mostly beaten-up but asset-rich companies, including Versacold Income Fund, a refrigerated warehousing/trucking outfit; Royal Host Real Estate Investment Trust, a hotel owner and franchisor; and General Donlee Income Fund, which makes aircraft components. Armoyan's modus operandi is the same in almost every case: He quietly starts accumulating shares through his principal public investment vehicle, Clarke Inc. Then, when he crosses the 10% threshold that requires him to publicly disclose his holding, he demands seats on the target's board of directors and input into management. The goal is to gain control and then engineer a turnaround, or sell off the company for a profit as soon as opportunity knocks.

Armoyan has no tolerance for what he calls "bullshit and bureaucracy." But he offers managers in his sights a carrot: "I tell them, 'My objective is to make you guys as rich as possible--as long as shareholders become rich too.'" If the managers don't play ball, he tells them, "Your talents should be used elsewhere." And he'll wage a proxy fight to replace unco-operative directors, if necessary.

In the case of Bikini Village, Armoyan, Simard and Roberge eventually hammered out a strategic plan. Then, at the company's AGM in June, shareholders elected three Armoyan-backed candidates to the board. Simard stayed on as CEO, but, in August, Roberge reverted to being just a director, and textile executive Mardiros Ounanian, who is also Armoyan's brother-in-law, was named chairman. Armoyan was in the driver's seat yet again.

The mere news that Armoyan has taken a position in a company is now enough to prompt copycat investors to start buying, which drives up share prices--what one analyst called the "Armoyan Effect." And now that Armoyan has relocated from Halifax to Bay Street, the deals are getting bigger. The maverick raider wants to transform Clarke into a mainstream player with a stock market value of $1 billion by 2010.

So is it time to tone down the bad-boy image? "A lot of people are pleasantly surprised when they first meet me," Armoyan says. "I don't have horns." He may not want word to get around. After all, being abrasive has worked fabulously well to date.

Armoyan has been searching for angles and opportunities since he was a kid. He was born in 1960 in the Syrian port city of Tartous, the first of three children. His father, Sami, was a watchmaker, and his mother helped out in the shop. As a boy, George set up a little stand in front of the store to sell candy. "Even then, I enjoyed trading and negotiating," he says.

Armoyan's grandparents, Armenian Christians, fled Turkey following the genocide of 1915, when an estimated 1.5 million Armenians died. Armoyan speaks Armenian, Arabic and Turkish--although he only visited Armenia for the first time this past summer. However, he says, "two Armenians inspire me": One is Calouste Gulbenkian, who gained renown--including the sobriquet "Mr. Five Percent"--for his deftness as a middleman between Western oil companies and Turkish and Iraqi oil interests after the First World War. The other is billionaire corporate raider Kirk Kerkorian.

In 1976, Armoyan's father sent him to live with an aunt and uncle in Boston; the rest of the family followed a few years later. When it came time for George to go to university, the family couldn't afford Harvard or other elite U.S. schools, but Lebanese friends in Halifax suggested the city's own Dalhousie University.

Armoyan studied civil engineering, although he wasn't all that wild about it. For one thing, campus social life--eating suicide wings and drinking beer--was a lot more fun. And he had other interests. While in school, he managed a 32-unit apartment building in which his parents had invested. "I did everything in that building," he recalls. "I vacuumed the hallways, I collected rent, I broke up fights on Saturday night."

In class, Armoyan liked courses such as economics and law much better than engineering. Still, he says, the engineering training proved useful later on in the real estate business. And it gave him his yen for hard assets. "I like 'stuff,' " he says. "I like to feel and touch."

Armoyan's penchant for bottom fishing also revealed itself soon after he graduated in 1982. Interest rates were at double-digit levels, and all kinds of businesses were on the ropes. One of his first deals was to buy the assets of a bankrupt three-store camping goods chain, The Outdoor Experience. "I liquidated them over a week or two and made good money," he says. "I took that money and put it toward my first real estate deal."

The real estate market was also in a slump, but Armoyan plunged in through his family's small private company, the Armoyan Group. He soon found he had a profitable niche and an outsized reputation. Even now, some people in Halifax mistakenly say Armoyan was principally a home builder in the 1980s and '90s. In fact, what he did was buy land, subdivide it and prepare it for development (putting in roads and sewers), then sell off lots to home builders or individuals. Often the lots were smaller than in established neighbourhoods nearby, which riled homeowners worried about declining property values.

Armoyan soon managed to become perhaps the most hated developer in town, often forging ahead with projects before he received permits from city hall. This led to frequent blow-ups with residents and local politicians. "Most of it was to do with cutting trees," Armoyan says with a shrug. "I was in such a hurry. But I never broke the law." Well, maybe he came close back when he started out. "I kited cheques for a while," he admits.

Armoyan couldn't resist firing back at his opponents, both at municipal council meetings and in the media. When one resident complained about an excavator ripping up land near his home, Armoyan told a reporter the guy was "a pain in the ass, and you can quote me on that."

The low point came after the Armoyan Group built several schools in new neighbourhoods in the '90s as part of a provincial public-private partnership. That program gave him a cut of cafeteria revenues. In 2001, it was reported that some education officials had accused Armoyan of trying to extend the deal into a realm where it had no business being--the chocolate bars, brownies and other items sold in schools for charity.

Armoyan sued the education department and a local paper for defamation. In the end, he says, the dispute was settled through a renegotiated contract that gave him other considerations in exchange for giving up the concession rights.

Does he have any regrets from those wild early days? Yes and no. "I wish I hadn't had the conflicts," he says. On the other hand, "I thrived for publicity." Thanks to the media coverage, he says, "people knew about my projects, and I sold them without any advertising."

Even some of Armoyan's closest friends roll their eyes a bit over his tendency to blurt out whatever he's thinking. "Some of us tease him that we've never read articles about anybody else where the word 'shit' comes up," says Michael Bregman, the former owner of the Second Cup coffee chain, now CEO of Toronto-based Tailwind Capital, which has invested in deals alongside Armoyan. "He doesn't swear a lot, actually, but whatever word comes out, comes out."

That combative streak, which gained Armoyan so much notoriety in Halifax, would soon vault him onto a bigger playing field.

Armoyan probably wouldn't have won control of Clarke--or even heard much about it--if then-chairman and CEO Roy Rideout hadn't pissed him off so much. In 2000, Armoyan had accumulated a small stake in Halterm Income Fund through another private holding company, Geosam Investments (named after his two sons, George and Sam, now 14 and 13). Armoyan thought Halterm's terminal and cargo-handling operation looked promising, and wanted to increase his holding. But one thing bothered him: Halterm had farmed out the management contract to Clarke, which shared the same ownership.

Armoyan says Rideout refused to sell that management contract. Even now, Rideout declines to discuss what happened

According to Armoyan, after Rideout balked, he began researching Clarke and noted that its share price had been stalled near $2 for years (price adjusted for subsequent stock splits). Armoyan began buying stock. When he reached a 16.6% holding, he demanded a seat on Clarke's board. The directors then renewed a takeover defence--a poison-pill provision that would be triggered when any shareholder raised his interest above 20%.

Armoyan was livid, and rallied other shareholders to vote down the poison pill at Clarke's annual meeting in August, 2002. A few days later, he raised his stake to 27%. And he kept the pressure on. That October, Rideout, then in his mid-50s, retired. The following April, Clarke announced that Darell Hornby, who had succeeded Rideout as CEO, was leaving "to pursue other opportunities."

Armoyan then took over as CEO himself. He quickly installed new managers and cut costs. In 2004, he sold off Clarke's logistics services business--which co-ordinated all aspects of cargo shipments for clients--for almost $50 million. Over the past three years, Clarke's share price has tripled.

But to conclude from all this that Armoyan is interested in running a trucking firm, or any of the day-to-day operations of the other companies he's bought into, would be a mistake. Clarke is now mainly an investing company--an "aggressive, entrepreneurial, activist catalyst investor," as Armoyan wrote in the company's annual report for 2006. He's too busy looking for the next takeover target to worry about the little stuff.

There is method to Armoyan's impatience. The deals he's made since taking control at Clarke aren't identical, but there's a pattern. He and a handful of advisers start by looking for companies or sectors that have had their share or unit prices battered. He's approached mostly mid-size companies so far, those with a stock market value of around $50 million to $150 million. That is deliberate--those companies tend to fly below Bay Street's radar screen because they're too small for analysts to cover, and institutional investors shy away because the shares aren't widely traded.

After Armoyan picks a target, he looks for hard assets on its balance sheet. He immediately values intangible or soft assets like goodwill or a brand name at close to zero. He'll also engage in a little covert intelligence-gathering if necessary. "We find out a lot of things by talking to people's competitors or pretending to be customers," he says.

Armoyan then usually acquires a stake of 10% to 20%, which is enough to press for seats on the board and to make managers wake up and take notice. Why not go for more than 50%? Buying smaller portions allows Armoyan to spread his money among more deals and also avoid many regulatory complications. Plus, with companies of this size, it can be difficult to unload a majority stake on the open market if things don't work out.

Once Armoyan has effective control of a company, he looks to achieve one of two objectives. One is for Clarke to be a sort of mini-Onex and engineer a turnaround

One of his earliest successes was Vaquero Energy, a Calgary-based junior oil company. He bought in at 57 cents a share in 2003, and set about fixing the place by providing management with fresh capital. Two years later, after Vaquero also got a boost from soaring oil prices, a rival took over the company for about $7 a share.

Then there are what Armoyan calls "opportunistic" investments--companies that he figures have been undervalued by the market, and which he's happy to sell for a profit as soon as someone makes a fair offer. Vancouver-based Versacold Income Fund, which owns and operates refrigerated warehouses in the Americas and Australia, turned out to be one of those. Armoyan bought up close to 20% of the company's units in 2006 and eventually secured several seats on the board. Versacold's unit price had been stuck below $9 for years.

In May of this year, Armoyan bought more Versacold units. The board, which had launched a "strategic review," continued talking to interested buyers. Within days, Armoyan had received a takeover bid from, suitably enough, Iceland. Eimskip Holdings Inc. offered $12.25 a unit; the $515-million deal closed in August. Brent Sugden, who is staying on as Versacold's CEO, says it was a good thing Armoyan was so aggressive: The sale was concluded before the stock market started melting in July. "Had it not been for George, we would have still been going through a process that would be mired in the current marketplace," says Sugden.

Even some owners and executives who have left companies in Armoyan's wake are impressed by the results he's achieved. In 1999, Armoyan started buying and selling small amounts of shares in Calgary-based hotelier Royal Host, which owns 37 properties under several banners, including Best Western and Hilton. In 2005, he raised his stake to 17% and began pushing the founding Royer family for changes, including boosting distributions to investors and buying back units.

In May, 2005, Armoyan cranked up the pressure. Minutes before Royal Host's annual meeting at the Metro Toronto Convention Centre, Armoyan took then-CEO Greg Royer aside and told him that he was nominating an alternate slate of directors. That slate prevailed, and Royer stepped down as CEO the next year. Armoyan brought in veteran hotel executive Mike Jackson, who moved fast to improve operations. "Impatience is a virtue in my mind," says Jackson, who left amicably in August.

Greg Royer says he has no hard feelings, either. "I'm happy as can be about Royal Host," he says. Its unit price has climbed to $7 recently from a low of near $4 in late 2003. "Thanks, I hope, to some of the things that I did and some things George did, it went up 50% in value."

Of course, a raider's life is easier when fire-sale prices prevail. The turmoil in the income trust sector over the past couple of years has afforded Armoyan some unique opportunities, particularly after federal Finance Minister Jim Flaherty's bombshell announcement last October that he was eliminating the trusts' tax advantages. "The dislocation resulting from the changes in the legislation, and even before that, created a vast opportunity, and George exploited it," says Michael Bregman. But Bregman adds that Armoyan is no one-trick pony. "His style is applicable elsewhere."

Not every Armoyan foray has been pro- fitable, however. In 2005, he bought a small stake in Hip Interactive Corp., a Mississauga-based video-game maker and distributor. It went into receivership just a few months later. Although it was a digital business, Armoyan says Hip had hard assets, including inventory and manufacturing facilities. The trouble was that some of its financial results had been falsified.

No one in the markets has taken much notice of this reversal. In his report-- "The Armoyan Effect"--published in April, Michael Mills, an analyst with Halifax-based Beacon Securities, followed the share prices of 17 companies Armoyan has invested in recently. On average, within five days of Clarke's announcing it had acquired an interest, the company's share price jumped by 12.3%.

That worries Armoyan a bit. "People shouldn't expect all of a sudden that the Holy Spirit will come along," he says. In fact, this past spring, the Armoyan Effect actually aggravated a dispute he had with the government of Newfoundland.

In April, Armoyan quit the board of FPI Ltd., the struggling Newfoundland fish processor, after running afoul of another Rideout--Fisheries Minister Tom Rideout--and just about everyone else on the Rock. Armoyan and Halifax seafood magnate John Risley had each acquired 15% of FPI, the limit for outsiders under provincial law. They wanted more, but the government refused to lift the restrictions. "It's a frustrating place to do business, with government interference," Armoyan griped, and said he'd sold his shares.

That prompted Rideout to ask securities regulators to investigate the unusually heavy trading in FPI stock during a price run-up in March and April, when the copycats were piling in. Armoyan dismissed the whole thing as a "vendetta," saying he'd done nothing wrong.

Apart from such fireworks, the copycats can make it more expensive for Armoyan to buy more shares in a company once he has crossed the 10% threshold that compels disclosure. The smaller and less liquid the company, the bigger the lift in share prices. That could make it hard for Armoyan to find bargains in the latest slumping sector to catch his attention: oil and gas services. Gas producers, in particular, have been drilling a lot less lately, but Armoyan figures that things will pick up again. "It's a depletable asset, and they have to replace reserves," he says.

Yet Armoyan isn't going to be satisfied by merely picking up a few more medium-size companies, no matter how cheap he gets them. While not a major force on Bay Street yet, he's actually lived in Toronto since 2003. He wanted his two sons to have the best possible education, so he rents a large house in Forest Hill across the street from their school, Upper Canada College. His landlord is also his neighbour: Ted Rogers.

True, Armoyan shifted Clarke's headquarters from Toronto to Halifax in 2005, and the staff of 30 people there includes his key takeover advisers. Armoyan says he made the move because he wanted to reward the city that gave him his start. For his own part, he only needs to be in Halifax once a month. It's more important for him to be "where the deal flow is."

The main reason for that is that he's now operating mainly through Clarke, --which is to say, using more of other people's money. Last November, Clarke raised $115 million for new acquisitions by selling convertible bonds on which it has to pay 6% interest. That's a big nut to cover, given the turmoil in the markets this past summer. Armoyan isn't fazed. "If I can't make 6% on the cash that I have, I'm in the wrong place," he says.

Armoyan is also dealing regularly with bigger players than he has formerly. "Do you want to have a big piece of a small pie or a small piece of a big pie?" he asks. "A small piece of a big pie is better."

Somehow, however, Armoyan seems destined to stay hungry. At his new offices in Toronto, it's basically just him and his assistant in a generic high-rise in the shadow of the bank towers at Bay and King. And he's still doing an awful lot of work himself. On an afternoon in early August, he looks weary; he's been back in Canada for a week after a month-long trip to Europe and the Middle East with his wife and sons. But he was on his BlackBerry practically every day. Today, he's operating on about two hours' sleep--his flight from Montreal the night before was delayed until after midnight, and he was in the office at 7 a.m. for a board meeting. "I'm like a zombie," he says.

Yet he's already set his sights beyond Bay Street. The biggest pie of all is south of the border. Armoyan has met with, and invested in, a small New York private equity firm, with a view to identifying opportunities. "In the United States, they are very competitive, more driven by a buck," he says. Is that intimidating? "I can handle myself."

Kirk Kerkorian, 90

Estimated fortune: $9 billion (all currency in U.S. dollars)

Born in Fresno, California, of Armenian immigrant parents, Kerkorian dropped out of school in the eighth grade. During the Second World War, he joined the Royal Air Force and flew planes from Canada to Britain. He made his first fortune selling Trans International Airlines for $100 million in 1968. Kerkorian then invested in hotels in fast-growing Las Vegas. In 1970, Kerkorian bought MGM, and has since owned its film studios and its Las Vegas hotels several times. He still owns a large chunk of the Strip. Detroit is another obsession: Kerkorian was Chrysler's biggest shareholder when Daimler-Benz bought it for $40 billion in 1998. Last year, he raised his stake in General Motors to almost 10%, then sold in frustration. This past April, he made an unsuccessful $4.5-billion bid for Chrysler. He may be one of the richest residents of Beverly Hills, but Kerkorian drives relatively inexpensive Detroit product like the Pontiac Firebird and Ford Taurus.

Carl Icahn, 71

Estimated fortune: $9.7 billion

Icahn dropped out of medical school to work on Wall Street in the 1960s. He soon started buying big stakes in companies and pressuring managers to cut costs and buy back stock. This pushed up the share price; then Icahn sold. In the '80s, Icahn profited from several takeover battles, including for Texaco and steelmaker USX, often getting the dough by using financier Michael Milken's junk bonds. After a slow period, recent forays include an unsuccessful drive to oust Time Warner CEO Richard Parsons last year that earned Icahn a $250-million gain. He revels in his tough-guy image--one of his most frequently quoted remarks is, "If you want a friend, get a dog."

Henry Kravis, 63

Estimated fortune: $2.6 billion

In 1976, Kravis and his cousin, George Roberts, and their friend Jerome Kohlberg founded Kohlberg Kravis Roberts & Co., where Kravis pioneered the LBO. To buy a company, KKR itself would put up something like 10% of the money and borrow the rest, much of it by issuing junk bonds. They would then streamline operations and sell off assets to help pay down the debt. In 1988, KKR bought RJR Nabisco for $31 billion, then the biggest buyout in history, a deal chronicled in the book and movie Barbarians at the Gate. Kravis is still one of Wall Street's biggest raiders. Companies KKR has bought and sold include Beatrice, Safeway, Duracell and Gillette. Entertaining clients at his lavish homes is part of the job for Kravis--for one party, he reportedly flew in 6,000 flowers from Europe and pumped the smell of coffee and croissants into guests' bedrooms in the morning.

T. Boone Pickens, 79

Estimated fortune: $2.7 billion

A geology graduate of Oklahoma State, Pickens founded Mesa Petroleum in 1956 with $2,500. But Pickens has discovered most of his gushers in the stock market, not outdoors. Pickens was one of the most successful "greenmailers" of the 1980s, buying up big stakes in large companies like Gulf, Phillips Petroleum and Unocal and threatening to mount a takeover. That forced managers to rustle up rival bids to drive him away. He now runs BP Capital Inc., a successful oil and gas investment fund. The Texas raider keeps in touch with his roots through his passion for paintings of cowpokes on horseback.

Ron Perelman, 64

Estimated fortune: $7.0 billion

The son of a Philadelphia factory owner, Perelman began buying small companies in the 1970s, including a jewellery chain. In 1985, he stunned Wall Street by taking over Revlon, using Michael Milken's junk bonds. Revlon has shrunk under the weight of that debt, but Perelman made billions in the late '80s and early '90s by snapping up distressed U.S. savings and loans institutions. His personal life is perpetually troubled, however. Last year, the squat financier divorced his fourth wife, actress Ellen Barkin, which cost him a reported $20 million.