Barington Dillard's Campaign Steps Up

Activist investor Barington Capital Group LP has taken its insurgency at Dillard’s Inc. up a notch Wednesday by nominating a minority slate of four director candidates to the department store chain’s 12 person board.

One of the candidates is Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, and a known governance expert.

The likelihood that Barington would launch a proxy contest at the Little Rock, Ark.-based company was high after the hedge fund on March 4 asked Dillard’s to provide a list of shareholders. Having a list of shareholders enables Barington to reach out to other investors and gain support for their proxy contest.

The activist group was founded by director James Mitarotonda, who early in his career was a Bloomingdale's employee. Barington and its partner, the Clinton Group, together own a 5.2%.

Other activist investors and shareholders interested in backing either Barington or the incumbent board still have an opportunity to buy shares. The annual meeting is scheduled for May 17 and shareholders that have a stake as of March 31 are eligible to vote shares at the meeting.

In addition to Elson, the Barington nominees include Mitarotonda, Nick White and
Eric S. Salus, who both have retail backgrounds.

The activists are recommending operational and strategic improvements, such as eliminating its dual-class stock structure, which gives the founding family control over the chain; evaluating its senior management team, which is overseen by the founding family; and shuffling the company's real estate portfolio by closing underperforming properties. The activist funds also would like to see the company complete a sale-lease back of owned properties, a typical tactic considered by activist investors seeking to have corporations raise capital for other purposes such as stock buybacks or special dividends. -- Ron Orol