SCOWL ON THE HUDSON
Activist after board
An activist investor is turning up the heat on Saks Fifth Avenue owner Hudson’s Bay Co.
Land & Buildings fired off its second letter in six weeks to the board of Hudson’s Bay on Monday, threatening to remove board members if the department store company doesn’t sell some of its prized real estate.
“We believe the board’s lack of independence may compromise its ability to properly evaluate and address the opportunities to enhance shareholder value,” wrote Jonathan Litt, founder of Land & Buildings, which has a 4.3 percent stake in Toronto-based Hudson’s Bay.
In June, Litt had asked Hudson’s Bay to consider selling its Saks Fifth Avenue Manhattan flagship which, it said, could be converted into an office building or hotel. The store’s flagging sales make such a move necessary, L&B said.
But the activist has since met with Hudson’s Bay senior management, including Executive Chairman Richard Baker.
“Unfortunately, during the course of our meeting, it became clear to us that the company feels it has looked at all options to improve value. We completely disagree,” Litt wrote in Monday’s letter.
Although Litt argues that a board shake-up is in order, proxy advisory firm ISS voted in favor of HBC’s 11 existing board members, awarding the board a rating of 9 out of 10.
“We welcome feedback from all of the company’s shareholders, and look forward to continued dialogue with Land & Buildings,” HBC said in a statement.
Among Litt’s demands are that HBC refocus the company on its Canadian roots by shrinking its store base in the US.
Nevertheless, HBC said it will continue to pursue growth in North America and Europe.
“Meanwhile, HBC has a strong history of successfully realizing underlying value of the company’s real estate assets, and has generated more than $3 billion in cash proceeds through these efforts,” the company added. “We are constantly evaluating additional opportunities to continue this track record of significant value creation.”
Litt argues that the real estate HBC owns is valued at $35 a share Canadian — more than three times HBC’s Monday closing price of $10.67.
HBC also owns Lord & Taylor and Saks Off 5th — and a majority of the real estate under its stores.