Activist Investor Takes Issue With Dillard's; Signs Indicate Upcoming Proxy Battle

by Mark Friedman  on Monday, Mar. 3, 2008 12:00 am  

Dillard's has a shareholders' meeting scheduled for May. And issues that will be brought up at the shareholders' meeting have to be disclosed this month. As of last week, Barington hadn't filed a preliminary proxy statement.

Barington Capital's activism is part of a growing trend, McGurn said. Hedge fund operators have become increasingly involved in corporate management and have succeeded at getting the changes they want, McGurn said.

"Many large funds and a subset of them have adopted corporate governance activisms as their investment strategy," McGurn said. "And so we've seen a literal explosion in the number of threatened proxy fights or other forms of activism by hedge funds in recent years."

Some think Mitarotonda can make changes at Dillard's even though the company's bylaws allow the holders of the Class B shares - that is, the Dillard family - to pick eight of the 12 board members.

If Barington can land one or two people on the board, that will be a victory, said Ron Orol, author of the book "Extreme Value Hedging: How Hedge Fund Managers Are Taking on the World."

"Management doesn't want even one of [the hedge fund managers'] candidates on the board," Orol said, "because they're part of the debate, and they can pressure the company into doing some of the things that the activist wants."

McGurn also said that if a dissident can land one or two board seats, though they won't control the boardroom, at least there would be minority representation on the board.

Dillard's spokeswoman Julie Bull declined to comment on Barington Capital.

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Right out of business school, Mita-rotonda took a job at Bloomingdale's in New York in 1979 and stayed there until 1981, according to Orol's book "Extreme Value Hedging."

He left Bloomingdale's and started working for Citibank until 1984, Orol wrote. That experience appears to have paid off.

In 1991, Mita-rotonda co-founded the investment firm Barington Capital.



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