U.S. activist investor Jonathan Litt on Monday called for Canada’s Hudson’s Bay Co to consider going private and to monetize its vast real estate holdings, sending shares in the owner of Saks Fifth Avenue up 13 percent.
Litt made the request to the board of directors in a letter which disclosed his investment firm Land & Buildings Investment Management LLC had acquired a 4.3 percent stake in Hudson’s Bay.
The company, also known as HBC, said in a statement that it was reviewing the letter from Litt, a former Citigroup real-estate analyst whose activist hedge funds focuses on the property sector.
HBC stock had lost about a third of its value this year amid declining sales at its retail stores, which include Saks, Lord & Taylor and the 347-year-old Hudson’s Bay brand.
The company this month said it would cut 2,000 jobs as part of a restructuring of its retail business. It did not discuss plans to monetize its US$10 billion-plus in real-estate assets by selling them or spinning them off in public offerings. Saks on Fifth Avenue in New York City is valued at US$3.7 billion.
Litt’s letter called on the company to focus on its real estate assets, saying they are worth $35 per share, nearly four times HBC’s closing price on Friday.
“The path to maximizing the value of Hudson’s Bay lies in its real estate, not its retail brands,” Litt said. “If there is a smarter and better use of any or all of the locations, stores should be closed and redeveloped and put toward their optimal use.”
Litt is known as an aggressive activist investor who pressures his targets through public letters, often pushing companies to sell themselves if they are unable to institute the changes he suggests.
In the last year, Litt has pushed for the sale of Brookdale Senior Living Inc, Forest City Realty Trust Inc and FelCor Lodging Trust Inc.
Litt took on Taubman Centers Inc this spring, calling on the company to consider putting itself up for sale. He waged an unsuccessful proxy fight to replace two directors on the board, including CEO Bobby Taubman.
In 2015, Land and Buildings launched a proxy fight against Macerich Co that resulted in the mall owner adding two directors and making corporate-governance changes.
One of HBC’s biggest shareholders said he agreed with some of Litt’s suggestions.
Joshua Varghese, a portfolio manager with CI Investments, said he would like the company to close some stores, stop opening new ones and focus on finding ways to get the value of its real-estate holdings reflected in the stock price.
CI Investments is the company’s sixth-largest shareholder with a 4.1 percent stake, according to Thomson Reuters data.
“I hope it will force the management team to address these issues in more detail with its shareholders,” Varghese said.
Founded in 1670, HBC began as a fur trader and once owned more than 40 percent of what is now Canada and much of what became North Dakota and Minnesota.
U.S. real-estate developer Richard Baker bought the company in 2008 and took it public in 2012, retaining its name and Toronto headquarters.
HBC shares were up $1.13 at $10.01 at midday Toronto trading after reaching a high of $10.45.
In addition to its North American department store chains, it also owns Galeria Kaufhof in Europe.
HBC also owns majority stakes in two real estate joint ventures worth over $8.1 billion (US$6.1 billion) for its property holdings in Europe and North America.
(Reporting by Solarina Ho and John Tilak in Toronto and Michael Flaherty in New York; Additional reporting by John Benny in Bengaluru; Editing by Lisa Von Ahn and Lisa Shumaker)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
Photo courtesy of Reuters/Mark Blinch