Jonathan Litt is calling on Hudson's Bay Co. (HBC) to maximize the value of its real estate and avoid the mistakes of its rival, Sears Canada. "Sears has been trying to remake itself as a department store and has not been—until recently—focused on monetizing the real estate," Litt, founder of Land & Buildings, told BNN in an interview. "I think here [with HBC] if they focus on the real estate sooner rather than later, investors will be better off." HBC has fared better than Sears Canada, which reportedly is on the brink of seeking creditor protection, but its shares dropped earlier this month in response to poor quarterly earnings and announced job cuts. Litt, who owns a 4.3% stake in HBC, urged the department store chain in a letter Monday to sell or redevelop some of its most desirable locations. Unlike many retailers, HBC owns its real estate assets, including the Saks Fifth Avenue location in New York across from Rockefeller Centre. Litt estimates the real estate is worth $35 per share—almost half of that from the Saks Fifth Avenue property. While operations currently are profitable in those locations, HBC could make even more by selling or leasing the space to other retailers, Litt said. He added that the board and management are uniquely qualified and have done a good job identifying the real estate, but "the next step is to more aggressively redevelop those locations."
Etsy (ETSY) intends to slash its workforce by an additional 15%, bringing the total number of eliminated jobs to 230, or about 22% of its headcount, compared with the end of 2016. CEO Josh Silverman, who was appointed last month after the sudden departure of Chad Dickerson, is working to turn the company around. Despite almost $3 billion in sales last year, the online marketplace has seen a slowdown in transaction growth, and it posted an unanticipated loss in the first quarter of this year. Silverman plans to focus the company on its core marketplace instead of niche initiatives such as Etsy Studio, a sub-site geared toward do-it-yourself crafts and hobbyists, according to a source. The workforce reduction "puts us at our fighting weight" Silverman says. The company has been criticized by shareholder Black and White Capital, which last month described the company's website search function as "horrendous" at matching buyers and sellers with complex and quirky demands. Black and White has also counseled the company to consider a sale. Last month, after private equity groups Dragoneer and TPG purchased a combined 8% stake in the company, Etsy said it was "reviewing strategic and operational plans."
In a town hall with employees, Whole Foods (WFM) CEO John Mackey described Amazon's (AMZN) $13.7 billion deal to buy the high-end grocer as a "marriage" that was announced six weeks after a "blind date" with Amazon that he characterized as "love at first sight." However, some investors are concerned that the deal was hastily orchestrated and in Mackey's best interests rather than the best interests of shareholders. Shortly after Amazon offered $42 a share to acquire the company, its stock price started rising above the deal price, indicating that investors believed a bidding war could emerge and drive up the final price. Walmart (WMT), Target (TGT), Costco (COST), and Kroger (KR)—whose shares all plummeted after the deal was announced—have been named as potential rival suitors, but they have yet to enter the fray. Although observers say it is uncertain whether they would have the ability to outbid Amazon, it appears that they were never even given the opportunity. Meanwhile, Amazon's offer represented a 27% premium over Whole Foods' stock price, and analysts and investors have questioned whether it was too cheap. Charles Kantor, a managing director at Neuberger Berman Investment Advisers—which owns nearly 3% of Whole Foods—said the offer undervalued Whole Foods' brand. Jana Partners and other investors have pushed for a management shake-up at Whole Foods, prompting Mackey and his team to hire top defense banker Evercore, which helped facilitate the deal with Amazon that would enable Mackey and his executive team to retain their jobs.
On June 20, investor Nicholas Bolton saw his reputation suffer when Molopo Energy shareholders snubbed his proposal to implement a new board. Bolton used his control of Keybridge Capital and Aurora Funds Management as vehicles to gain a significant shareholding in Molopo. Observers believe he could have succeeded were it not for interference from the Australian Securities and Investments Commission (ASIC). After Aurora and Keybridge boosted their holdings in Molopo to 17.89% and 19.44%, respectively, ASIC made an application to the Takeovers Panel in April, on the grounds that Keybridge and Aurora were associated with one another and their collective 37.33% interest in Molopo was in violation of the Corporations Act. Among other action, ASIC sought interim orders blocking Keybridge and Aurora and their respective associated entities from exercising any voting rights, acquiring any further relevant interests in Molopo, and disposing of any Molopo shares. It also sought final orders that any Molopo shares acquired by Keybridge and Aurora since July 4, 2016, be vested for sale and that Aurora and its associated entities be banned from making any further acquisitions of Molopo shares that would exceed a combined 20%. At Molopo's June 20 annual meeting, in a blow to Bolton, shareholders voted in line with the board and rejected the candidates put forward by Keybridge and Aurora.
Cenovus Energy announced early Tuesday that CEO Brian Ferguson is retiring at the end of October—but one investor argues more change is needed. "It is a step in the right direction, but it's not enough," said Len Racioppo, managing director at Coerente Capital, which owns about 500,000 Cenovus shares. Racioppo cited poor execution and decision-making, and also noted the need for board change. "You need a pretty significant cultural change here," he said. Racioppo had asked regulators to halt the company's $17 billion purchase of ConocoPhillips (COP) assets in April. Ferguson's departure was announced just hours before the company held its investor day in Toronto, where the CEO was expected to face shareholder unrest over the ConocoPhillips deal. Racioppo did not rule out the prospect of engaging the company, but emphasized a greater need for consolidation within Canada's oil and gas sector. "It's possible," Racioppo said of activist intervention, adding, "I think this industry needs to consolidate. I don't know what kind of appetite others will have with the debt-level that Cenovus has, but those are all things that we'll look at."
Mitch Dawney, the former stockbroker behind an unprecedented offer for an option of 19.9% of oil and gas producer AWE, insists the Melbourne-based company should now pursue a sale to other parties. No money would change hands upfront, but the offer would grant Dawney the right to exercise the option at 56 cents a share by September. AWE was trading at 45 cents a share before the offer was announced. The shareholders who accept the offer also would have the right to 95% of the proceeds from any on-sale of the stake by Dawney above 56 cents a share. If he can orchestrate a sale to a third party, Dawney stands to collect about $50,000 for every cent above 56 cents a share. Dawney said the offer is a means for disgruntled shareholders to signal that they are unhappy and want the company to pursue a sale. "I obviously don't have $60 million to buy a 20% stake," he said. "I just feel that with north of 18,000 shareholders on the register, there's probably a few people who are feeling frustrated with how things are going and the serial underperformance." Dawney and his associate currently hold about 885,000 shares in AWE. According to RBC Capital Markets analyst Ben Wilson, the proposal is a novel approach that resulted in some share price momentum, but it likely will not get much uptake.
PointNorth Capital has succeeded in its campaign for board representation at Liquor Stores N.A. Ltd., putting an end to a bitter months-long proxy fight at the Canadian chain. Liquor Stores announced on Monday that six of its eight board members—including Chairman Jim Dinning—would not seek re-election at the annual meeting on Tuesday, clearing the way for all six of the dissident investor's nominees. PointNorth Capital, Liquor Stores' largest shareholder with a roughly 10% stake, had argued Liquor Stores suffers from low shareholder returns, excessive costs, and falling same-store sales in Canada. The retailer said it came to its decision after reviewing shareholder votes already counted, which suggests PointNorth's campaign was well-received. Pending Tuesday's vote, the new board will be responsible for delivering PointNorth's strategy for Liquor Stores, which includes cutting labor and other costs as well as renovating and rebranding all Canadian stores. The battle at Liquor Stores even led to a complaint with Alberta's securities watchdog over a so-called vote-buying scheme by the retailer. Claiming the scheme was against the public interest, PointNorth filed an application with the watchdog seeking to block any payments and have Liquor Stores punished for the move. Shareholder advisory firm Glass Lewis, which did not support PointNorth's bid for a complete board shakeup, did say that the current board should be held accountable for the "vote-buying scheme," recommending that shareholders vote against Dinning. The securities commission declared Liquor Stores did not violate any securities laws, concluding the complaint failed to justify any action against the company.
Top BHP (BBL) shareholder Aberdeen Asset Management has backed Elliott Management's call for the miner to replace its dual listing with a primary Australian one, saying it would be better than the current structure if it could be done for a good price. "Ultimately, a single listing in Australia would be ideal because it is an Australian-based company and most of its business is here," said Andrew Preston, Aberdeen's head of corporate governance in Australia. Several of the non-Australian aspects of the company, which were the reason the dual listing in London was created in the first place, have been split off anyway, he explained. In April, Elliott called for BHP to dissolve the dual listing for a British primary listing, but later returned with a proposal for an Australian primary listing. The hedge fund, which claims a 4.1% stake in the London shares, says dissolving the dual-listed structure would release US$9.7 billion ($12.7 billion) of BHP franking credits more quickly. "The question of releasing franking credits to Australian investors is quite a key one," Preston said. "If that could be better achieved by a single listing here, then that would be positive for local investors in the company." But he emphasized that the costs need to be carefully assessed. BHP argues the cost would be US$1.3 billion but Elliott says it would be closer to US$200 million, saying that the dual listing's tax benefits are unsustainable because of pressure from the Australian Taxation Office. Aberdeen is BHP's second-largest shareholder, owning 4.9% of the company's London-listed stock and an undisclosed stake in Australian-listed shares.