Activist Prods Parent Of Saks -- WSJ
June 19 2017 - 02:02AM
Dow Jones News
By Suzanne Kapner and David Benoit
An activist investor is pushing the parent of Saks Fifth Avenue
to consider strategic alternatives, including possibly taking the
company private or redeveloping its vast real estate holdings, in
the latest sign of the challenges facing the department-store
industry.
Land & Buildings Investment Management LLC, which has
accumulated a stake of roughly 4.3% in Hudson's Bay Co., said in a
letter that is expected to be delivered to the company's board
Monday that its real estate is worth four times the stock price.
The Wall Street Journal viewed a copy of the letter.
"This drastic public markets mispricing is why Hudson's Bay
should evaluate all strategic options to maximize value for
shareholders," Jonathan Litt, founder and chief investment officer
of Land & Buildings, wrote in the letter.
He noted that over the past several months, as Hudson's Bay has
taken abortive looks at acquiring Macy's Inc. and then at Neiman
Marcus Group -- as reported by the Journal, the company's stock has
fallen 25%.
The Macy's talks were preliminary and never progressed far, and
the discussions with Neiman Marcus fell apart over price, people
familiar with the situation have said. Last week, Neiman Marcus
confirmed that any conversations it had been having about selling
itself had terminated and it planned to remain independent.
A Hudson's Bay spokesman had no immediate comment late
Sunday.
Land & Buildings could face an uphill battle since insiders
own a large chunk of the company's stock, possibly making it
difficult to force their hand.
This month, Mr. Litt lost a shareholder vote to force change at
mall owner Taubman Centers Inc. -- largely because of the
controlling family's large voting block. He continues to push for
change there. Mr. Litt has also been urging change at real-estate
empire Forest City Realty Trust Inc. and Brookdale Senior Living
Inc.
Either way, the campaign is the latest sign of the upheaval
roiling the department-store and broader retail industry as
shopping habits evolve. Hudson's Bay recently said it would
eliminate 2,000 jobs in North America, part of an effort to save
$350 million annually.
Hudson's Bay Chairman Richard Baker is a real estate executive
who grew up building shopping centers with his father Robert,
founder of National Realty & Development Corp.
He began stitching together a department-store conglomerate a
decade ago with the acquisition of Lord & Taylor, followed by
Saks Fifth Avenue in 2013. The company also owns the Hudson's Bay
chain in Canada, and Galeria Kaufhof in Germany.
To highlight the value of Hudson's Bay's real estate, Mr. Baker
has formed joint ventures with several mall owners and obtained an
independent appraisal of the Saks Fifth Avenue flagship in
Manhattan that values the store at more than the $2.9 billion
Hudson's Bay paid for the whole company.
"Retail and department stores are at a crossroads," Mr. Baker
told shareholders gathered for the company's annual meeting earlier
this month. But he added that the retailer is taking decisive
actions to position the company to adapt, including cost
reductions, a relocation of capital spending and bolstering the
balance sheet.
Mr. Litt, a well-known real estate investor, wants Hudson's Bay
to go further, arguing that it could generate better returns for
shareholders by redeveloping its prime department-store space into
office towers, hotels or boutiques. Alternatively, Hudson's Bay
could go private, given its modest market capitalization of roughly
$1.2 billion and insider ownership of roughly 20%, Mr. Litt
argues.
Nordstrom Inc. recently said it was considering going private as
a way to wait out the changes roiling the retail industry as more
shoppers migrate online. On Friday, Amazon.com Inc. said it was
buying Whole Foods Market Inc. as the online juggernaut ramps up
its grocery business.
As the share prices of large retail companies have plummeted,
investors are eyeing their real estate as a way to unlock value
from the chains. Starboard Value LP took a stake in Macy's for this
reason, but sold its shares earlier this year.
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com and David
Benoit at david.benoit@wsj.com
(END) Dow Jones Newswires
June 19, 2017 02:47 ET (06:47 GMT)
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