Activist Target Hudson's Bay To Undertake Strategic Review

Aug 25 2017 | 9:24pm ET

Canadian retailing giant Hudson's Bay, under pressure from Jonathan Litt’s activist hedge fund manager Land and Buildings, has agreed to carry out a strategic review of its options.

The review will study potential sales of retail assets and real estate and will include going private, according to Reuters. 

Litt unveiled a 5% stake in the company back in late June, saying the firm should explore going private, selling assets such as its Saks Fifth Avenue brand, or otherwise monetizing its massive real estate holdings. At the time, the Stamford, Connecticut-based hedge fund expressed frustration that despite compelling value in the firm’s real estate holdings and an estimated C$5 billion valuation for the Saks brand alone, Hudson Bay’s share price had fallen sharply from its mid-2015 levels above C$28 to under C$10.

The company’s stock jumped on news of the strategic review, gaining 14% in Friday trading to close at $11.45. The company’s market capitalization is now around C$2 billion, still a fraction of what Litt believes it is worth. 

 Hudson’s Bay is already working with an investment bank to defend itself against Land and Buildings, and is reportedly seeking to hire additional advisors for the review, Reuters continued.

Like many brick-and-mortar retailers, Hudson’s Bay has seen its business erode as consumers continue to shift to online shopping. Litt, who has characterized the firm as a “real estate company, full stop,” believes Hudson Bay’s real estate holdings could be worth as much as $10 billion, nearly five times the whole company’s current valuation.

The hedge fund ramped up pressure in July by saying it would call for a special meeting of shareholders in order to nominate directors for the board unless Hudson’s Bay took concrete measures to increase its stock price. Litt, who often takes a more collaborative approach to his targets than many of his activist peers, has openly said he does not care whether the increase in value came from his plan or one developed by the company as long as progress was made. 

Prior to founding Lands and Buildings in 2008, Litt was a top gaming and lodging analyst for Citigroup. He started the company in the immediate aftermath of the financial crisis to take advantage of distressed pricing in the industry. Aptly-named Land & Buildings specializes in publicly traded real estate and real estate related securities. 

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