AlphaSituations-Event/Catalyst Driven Research, AlphaSituations

Robert Sassoon

Robert Sassoon has been an equity analyst for more than twenty years focusing primarily on global special situations. Robert has worked in research for several large sell-side institutions, including Credit Suisse, Natwest Capital Markets and Societe Generale. During his career, he has achieved top 5 rankings in various analyst surveys, including the Extel and Greenwich surveys.

In 2017, Robert founded AlphaSituations, an idea-generating investment research service with the goal of delivering a unique portfolio of ideas to drive client growth and returns by uncovering compelling and highly profitable value propositions as well as lucrative shorter-term trading situations arising from select dislocating corporate restructuring events and catalysts. Currently, the main geographical focus of the research is North America. Since its establishment, AlphaSituations has delivered a track record of outperformance with a hit rate of winners of more than 70% of its portfolio of ideas generating annualized average returns of 20%.

In January 2022, AlphaSituations was contracted  by Water Tower Research,  an investor engagement and stakeholder communication platform to provide coverage of Special Situations.

AlphaSituations-Event/Catalyst Driven Research

ActivistTalk: Hudson's Bay Go Private Proposal - Why It Raises Questions & Could Invite Lawsuits

AlphaSituations

Since its establishment, AlphaSituations has delivered a track record of outperformance with a hit rate of winners of more than 70% of its portfolio of ideas generating annualized average returns of 20%. In January 2022, AlphaSituations was contracted by Water Tower Research, an investor engagement and stakeholder communication platform to provide coverage of Special Situations

Event-Driven

When AlphaSituations initiated coverage of this activist situation in the wake of intervention from activist fund Land &amp; Buildings (L&amp;B) in July 2017, we were hopeful of Hudson's Bay (HBC CN) moving towards or being pushed into unlocking the substantial value trapped in its real estate assets. However, two years on, somewhat disappointingly, L&amp;B’s agitation and HBC management’s mixed results efforts to turn around the company’s retail operations have culminated in a management-led buyout proposal of C$9.45/share that delivers little incremental value to minority shareholders. The buyout proposal offers little recognition of the value of HBC’s real estate assets estimated by HBC’s own management at ~C$28/share. However, when considered in the context of a retail business buyout, the perspective is very different. The offer values HBC at ~11X Consensus 2019 EBITDA which is towards the top end of the North American Department Store peer valuation range and significantly higher than the ~5X at which Macy’s (M US) and Nordstrom (JWN US) are presently trading.With the management-led buyout group in control of 57% of HBC’s fully diluted share count, we see little pressure on it to raise its offer by more than a modest amount at best, if at all. This is reflected in the HBC share price which currently trades at ~5% premium over the buyout offer. It is also very possible that the buyout proposal may ultimately collapse as it is subject to approval by the minority shareholders and with the shareholders of the buyout group ruling out the sale of their equity to a third party. After two years of frustration, we posit that the risk-reward profile for the share price is unattractive and will remain so until there is evidence of more substantive moves to unlock the value of its real estate assets through asset monetization or through REIT conversion which are currently not on the immediate horizon. We think L&amp;B will likely continue to be frustrated and may decide there is greater wisdom in an exit strategy as did Starboard after failing to convince Macy’s (M US) to pursue a REIT conversion strategy for its real estate assets in 2016.

When AlphaSituations initiated coverage of this activist situation in the wake of intervention from activist fund Land &amp; Buildings (L&amp;B) in July 2017, we were hopeful of Hudson's Bay (HBC CN) moving towards or being pushed into unlocking the substantial value trapped in its real estate assets. However, two years on, somewhat disappointingly, L&amp;B’s agitation and HBC management’s mixed results efforts to turn around the company’s retail operations have culminated in a management-led buyout proposal of C$9.45/share that delivers little incremental value to minority shareholders. The buyout proposal offers little recognition of the value of HBC’s real estate assets estimated by HBC’s own management at ~C$28/share. However, when considered in the context of a retail business buyout, the perspective is very different. The offer values HBC at ~11X Consensus 2019 EBITDA which is towards the top end of the North American Department Store peer valuation range and significantly higher than the ~5X at which Macy’s (M US) and Nordstrom (JWN US) are presently trading.With the management-led buyout group in control of 57% of HBC’s fully diluted share count, we see little pressure on it to raise its offer by more than a modest amount at best, if at all. This is reflected in the HBC share price which currently trades at ~5% premium over the buyout offer. It is also very possible that the buyout proposal may ultimately collapse as it is subject to approval by the minority shareholders and with the shareholders of the buyout group ruling out the sale of their equity to a third party. After two years of frustration, we posit that the risk-reward profile for the share price is unattractive and will remain so until there is evidence of more substantive moves to unlock the value of its real estate assets through asset monetization or through REIT conversion which are currently not on the immediate horizon. We think L&amp;B will likely continue to be frustrated and may decide there is greater wisdom in an exit strategy as did Starboard after failing to convince Macy’s (M US) to pursue a REIT conversion strategy for its real estate assets in 2016.

ActivistTalk:Land & Buildings/Hudson's Bay Co - The Conundrum In HBC Management's Go-Private Bid