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The Morning Brief: Barington Lays Out Plans for Chico’s
James Mitarotonda’s Barington Capital Group published a more than 100-page report on how it plans to boost the value of specialty retailer Chico’s FAS. The New York-based activist firm, which owns 1.5 percent of the company’s shares, has also nominated two individuals to the board: Mitarotonda and Janet Grove, a former vice chairman of Macy’s and former chairman and chief executive officer of Macy’s Merchandising Group.
Barington wants to improve Chico’s merchandising and operating execution and grow the Soma brand, and offered recommendations for repurchasing stock and improving executive compensation practices. “Chico’s is one of Barington’s largest investments and we intend to continue to purchase shares at current market prices,” the hedge fund firm states in the presentation. “We are convinced that we can help Chico’s substantially improve long-term shareholder value, and that if the company implements our recommendations, Chico’s could more than double its earnings per share in three years.”
As a result, Barington thinks the stock would be worth close to $25 to $27 per share. It closed Friday at around $11, up about 2.3 percent.
Pershing Square Capital Management, which is posting bruising losses this year after a terrible 2015, is laying off more than 10 percent of its staff. The New York hedge fund firm headed by William Ackman fired eight lower-level employees, according to a Wall Street Journalreport. The employees were mostly involved in back-office tasks such as technology and investor services, according to the report, which says Ackman told the employees the layoffs have nothing to do with the firm’s huge losses but rather are related to an increase in the automation of several functions.
Still, Pershing Square Holdings, the firm’s public fund, is down nearly 21 percent for the year through June 21 after losing 20.5 percent last year. Pershing Square International is down 17 percent this year through June 21, according to HSBC.
Corvex Management’s Keith Meister made public his resignation from the board of directors of the Williams Companies, stressing in a letter, “I have resigned because I can no longer in good conscience serve on a Board where a majority of that Board was unwilling to make a change that I felt was critical to the future direction of the Tulsa, Oklahoma company.” He was one of six directors — including fellow hedge fund manager Eric Mandelblatt of Soroban Capital Partners — who resigned after they failed to replace Alan Armstrong as CEO. He said he and Mandelblatt “did not hear a credible defense” of Armstrong’s tenure over the past five years. “As Williams now charts its future at this crucial juncture, I feel that those failures compelled a change for the good of our shareholders,” Meister stated, adding, “I do not see any basis for concluding that change was not required.” Meister says he can be more effective working from outside the company than within.
Atlantic Investment Management cut its stake in Owens-Illinois by nearly 1.8 million shares, to nearly 10.4 million shares. However, it still owns 6.4 percent of the total outstanding of the maker of glass container products. The stake is an activist position, but the New York hedge fund firm makes it clear it has no specific proposal for the Perrysburg, Ohio company. The stock remains Atlantic’s largest U.S. long holding in a portfolio of 13 stocks.
Credit Suisse trimmed its price target on Darden Restaurants to $69 from $72 after the restaurant company reported fiscal fourth quarter results that were in line with expectations but served up “surprisingly light” guidance. “We still see DRI as an above-avg. story in a challenging restaurant sector,” the investment bank tells clients in a note.
Jeffrey Smith’s New York-based Starboard Value, which won a proxy fight in 2014 and replaced Darden’s entire board, has been reducing its stake in the company. In late May it sold 538,000 shares for between $65 and $66 per share, lowering its position to 4.8 percent. Starboard was still the second-largest shareholder of the Orlando, Florida company after the sale. However, it no longer needs to report additional timely sales in amended 13D filings. The stock closed Friday at $62.99, down 0.55 percent.
Julian Robertson Jr.’s Tiger Management nearly halved its stake in Enzymotec, an Israeli firm which supplies lipid-based products. It now owns 2.5 percent of the shares, which are a passive holding for the New York investor.