Activist investor Land and Buildings claims that Hudson’s Bay Company has engaged investment bankers to explore strategic alternatives as it calls for the retailer to monetize real estate assets.
In a recent discussion with BNN, Peter Landers – Partner, Global Governance Advisors, spoke about the implications of this situation. He said, “It is the board’s responsibility to act in the best interest of the shareholders. And in situations such as this where there has been a decreasing share price, we have seen boards in the past set up these committees and look at all their strategic options in terms of what can create the most value in the long run.”
From a corporate governance standpoint, Peter emphasized the importance of getting the support of larger institutional investors to be able to push through any big, strategic decisions. “As companies move increasingly further towards a decision or an opportunity, it really becomes more important to make them while being transparent with shareholders and letting them know the decisions that are being made,” added Peter.
Commenting on whether the Board is obligated to respond every time an activist investor puts out a press release, Peter explained, “I think, now that HBC is in a situation where there are a lot of rumours spreading, it would be common to come out with a short press release saying that they have struck up an independent committee that is reviewing the strategic options and will have a decision coming out of that strategic review over the next 60 to 90 days.”
According to Peter, the outcome of this situation depends on HBC’s reaction and how they respond to these allegations from Land and Buildings. “If the situation continues to get heated, as we have seen with CP Rail where there has been a clear divide between management’s philosophy and the activist shareholder’s philosophy, that ultimately led to a proxy fight. But we have also seen examples where a company has taken the concerns of these larger shareholders into account and avoided these types of situations.”