Dillard's and Barington Agree on Candidates

A settlement reached late Tuesday over the future of Dillard’s Inc. is a mixed bag for both the activist investors seeking change and the management of the department store chain.

Insurgent investor Jim Mitarotonda of Barington Capital Group LP and another fund, Clinton Group Inc., nominated a slate of four directors for the company’s 12-person board. But he agreed to call of his campaign after Dillard’s agreed to one of his candidates and three other mutually agreed upon individuals.

Nick White, a former Wal-Mart executive, was on Mitarotonda’s initial slate of nominees and he was included on the board. Three other individuals, James A. Haslam III, chief executive officer of Pilot Travel Centers LLC, R. Brad Martin, former chairman and CEO of Saks Inc. and Frank R. Mori, co-CEO and president of Takihyo Inc. and former president and CEO of Anne Klein Inc., were also put on the board. These three were not part of the Barington-Clinton slate.

“Both the board and management welcome the perspectives and insights of our proposed new directors,” Dillard’s Chairman William Dillard II said in a statement.

And even though Mitarotonda did not get most of his chosen candidates on the board -- one of the candidates he put up for election was himself -- he did get a slate that is likely to be more independent of management than the incumbents it replaces. (Eight of the 12 directors are controlled by the Dillard’s family through their ownership of Class B shares).

Also, with this partial victory, Mitarotonda was able to have the company agree to re-examine its real estate and capital obligations. It also agreed to close department stores that were underperforming and subject new locations to return on capital requirements. The activists had hoped Dillard’s would complete a sale-lease back of owned properties, a typical tactic considered by insurgents seeking to have corporations raise capital for other purposes such as stock buybacks or special dividends. Even though that didn’t happen, the company’s steps to put a razor eye on real estate is a step in the activists' direction.
And there is always next year. -- Ron Orol