Activist investor Starboard Value LP urges Macy’s Inc. (NYSE: M) set up a joint venture for the company’s valuable landmark properties such as its flagship Herald Square store in New York to increase shareholder value.
The activist hedge fund said in a letter and presentation that it supports the company’s recently announced job cutting plan, but it still wants the company to strike real-estate deals to squeeze more cash out.
"We believe pursuing joint venture structures is the most prudent step for Macy's at this time to create significant value for shareholders given the wide discrepancy between the value of the real estate and the current enterprise value of the Company," Starboard said in a letter to Macy's CEO Terry Lundgren. "We believe that a joint venture, or series of joint ventures, can crystallize the value of Macy's real estate while bringing in a partner with substantial capital and real estate expertise that will enable the joint ventures to grow and diversify their real estate holdings.
The real-estate deal is to separate Macy’s properties into two or more entities. Starboard suggested the company to separate the properties into two joint ventures – one for its landmark properties like Herald Square and Union Square, and the other for its hundreds of mall-based stores. The activist investor said that the landmark properties are worth $21 billion and the separation will create $10 billion in shareholder value.
Macy’s share is up by 3.20% to 37.04 at 10:57AM EST after the news.