Sunday, September 28, 2008


Barington Capital Group LP and Clinton Group Inc. have joined forces to urge a change in the share structure of Dillard's Inc., a mall-based retailing company.

The two activist investors filed a letter with the SEC last week asking the board of Dillard's to remove its dual share structure, which as things stand keeps in the hands of class B shareholders the right to elect two thirs of the board.

The existing management group owns W.D. Co., which in turn owns about 99.4% of class B shares.

My first thought when hearing of such a situation is that there is something to be said for the principle of "caveat emptor" in the ownership of shares of stock,, though. Anyone who bought any shares in Dillard's should have done the research in advance necessary to understand that the management maintains this sort of lock on control. If they have done that homework, then one would expect the price of class A stock would sell at a discount that reflects the limited significance of the vote that comes with it.

But the first thought is not always the best thought. One might also consider that operationally, same store sales have fallen over the past year. Maybe the management is doing itself as shareholders a service by locking things up so tightly. Maybe a shake-up in control could have effects on the sales numbers.

Anyway, the two hedge funds togerther own 5.67% of that class A stock. Their letter asks for a committee of independent directors to be formed to consider their proposal.

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