Analysts at TD Securities say reports that management at Lord & Taylor and Saks Fifth Avenue parent Hudson’s Bay Co. is considering taking the company private could potentially be positive. Hudson’s Bay shares rose roughly 14% Friday afternoon following media reports that management is looking to carry out a review of its options, including possibly privatizing the company. “[Hudson’s Bay] appears to be focused on improving its retail results through further investment in its operations, cost-cutting and organic growth within both Europe and North America,” analyst Brian Morrison wrote in a note to investors. “Clearly, activist investor Jonathan Litt opposes HBC’s current strategy, stating that he may be forced to call a special meeting to remove directors if HBC does not take actions to implement a plan to close the gap between underlying value of its asset base and share price.” Morrison pointed out that Litt recommended that a management-led buyout could be an intriguing proposition. Morrison, who rates Hudson’s Bay a hold, and maintains a C$12.50 12-month price target, said in light of current pressures on retail that he couldn’t rule out a potential privatization transaction by management. “Our fundamental view remains that in the absence of selling or repurposing its Saks flagship, HBC’s current strategy is unlikely to result in the full value of HBC’s real estate being reflected in its share price near-term,” Morrison wrote. Shares of Hudson’s Bay have declined more than 13% in the year to date.
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