Dillard's Shareholder Makes Waves, Aims for Turnarounds

by Lance Turner  on Thursday, Jun. 28, 2007 2:33 pm  

James Mitarotonda, a co-founder and principal of Barington Capital Group, as seen in an article from the Wall Street Reporter here.

James Mitarotonda, a co-founder and principal of Barington Capital Group LP, has been described as "assertive" and "hardnosed," someone who knows how to choose his battles.
In other words, not someone who lets unreturned phone calls get in the way of what he wants.
An activist shareholder and equity fund manager who has caused CEO resignations and company turnarounds, Mitarotonda now has his sights set on Dillard's Inc. of Little Rock, the tight-lipped department store chain whose founding family keeps a tight grip on company control. Barington said it represents a group of investors that owns more than 3.2 percent of Dillard's shares.
This week, after failed attempts to reach Dillard's CEO William Dillard II by phone, Barington Capital released a letter requesting a meeting with Dillard's management to discuss ways it could help improve shareholder value.
Dillard's spokeswoman Julie Bull was out of the office Thursday and unavailable for comment. Barington has declined further comment to media, except to tell Bloomberg that Dillard's has not yet responded to its letter.
The Dillard family's grip on the retailer's board of directors would make any outside interference nearly impossible. The company operates under a system that features two classes of shares, A and B. The Dillard family has control of less than 3 percent of the class A shares outstanding and more than 99 percent of the class B shares. Dillard’s class B shares get the same single vote as A shares, with one difference: B shareholders get to elect eight directors to the board, while A shareholders elect four.
No doubt Mitarotonda and Barington Capital know this. A Wall Street Report article on Mitarotonda, written around 2003, notes that his "hardnosed determination is offset by a subtle sense for picking public confrontations he can win."
It appears he's winning with at least one company, Pep Boys. The Philadelphia-based auto parts and service company had been flagging in 2006, until Barington's private equity arm and another firm gained board representation and promptly removed Pep Boys' CEO. So far in 2007, Pep Boys has posted a profit two quarters in a row as its new CEO seeks bigger margins and a new strategic plan.
In 2006, Mitarotonda set his sights on publicly traded Warnaco of New York City, a fashion company that owns or co-owns such brands as Olga, Lejaby, Rasurel, Calvin Klein, Catalina, Speedo, and Anne Cole.
Mitarotonda purchased a $40 million, 5.6 percent stake in the firm, and criticized management for favoring itself with cheap stock and undeserved performance bonuses. He also said he wanted to help management explore any value-producing ideas, including a possible sale.
Warnaco hasn't sold. But in May, the company reported substantial first-quarter profit growth, and its board authorized a 3 million share repurchase program.
Mitarotonda has also been credited with the turnaround at publicly traded clothes retailer Syms and for small gains at chemical maker A. Schulman.

The Next Arkansas Activist?
Could Mitarotonda be the next shareholder activist to make waves for an Arkansas public company?
It's too early to tell. But Mitarotonda would not be the first to change an Arkansas public company from the inside.
Perhaps the most famous, and most recent, would be Jeffrey Ubben and his ValueAct Capital Partners of San Francisco. Ubben, who made repeated attempts to takeover Acxiom Corp. of Little Rock in 2005, was the data firm's largest shareholder. After his two buy-out attempts were turned down by Acxiom CEO Charles Morgan and the company's board of directors, Ubben finally reached a deal to get two seats on Acxiom's board: one for him and another for someone Ubben designated.
Later, Ubben urged a major stock buyback plan and, earlier this year, sealed a $3 billion deal to take the company private with a partner equity firm, Silver Lake Partners.
A second shareholder making waves: Joseph Stillwell of New York City, who individually and through Stilwell Value Partners LP, Stilwell Associates LP and Stilwell Value LLC, owned 6.9 percent of the outstanding shares of HCB Bancshares of Camden.
In 2001, Stilwell advised HCB Bancshares to begin a substantial stock buy-back program and hire an investment banker “to better evaluate all options to increase shareholder value.” He implied that his group would not quietly sit by if management failed to take action to address his concerns.
A Stilwell representative, New York attorney John G. Rich, got a seat on the HCB board in 2001. Stilwell the told HCB management that it had until June 30, 2003, to improve its ROE to the national average for publicly traded thrifts.
The company missed the mark.
HCB was purchased in 2004 in a $27.9 million transaction by a group of investors led by L. Walter Quinn of Little Rock. The move took the Heartland Community Bank venture private and resulted in the sale of its former headquarters operation in Camden to Farmers Bank & Trust Co. of Magnolia.

 

 

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