BMO Adds Macerich To Shopping Cart After CEO Announces Retirement

Macerich Co MAC announced Thursday that CEO and Chairman Arthur Coppola will retire by the end of 2018.

Shares initially popped 3.7 percent on the news, and while the stock has since conceded the gains, some on the Street are still buying.

The Rating

BMO Capital Markets analyst Jeremy Metz upgraded Macerich from Market Perform to Outperform and increased the price target from $62 to $66.

The Thesis

BMO anticipates an inflection in fundamentals over the next two years as tenants reinvest in their stores. Macerich's management change could lend further support to share recovery, Metz said in a Friday note. 

Coppola declined a $95.50-per-share takeover offer from Simon Property Group Inc SPG in 2015; shares now trade down nearly 30 percent, the analyst said. 

The REIT tried to recover value by improving margins, selling non-core assets, securing joint venture assets, cutting general and administrative expenses and buying back stock, but their futility attracted activist investors prepared for a proxy battle, Metz said. 

“Mr. Coppola transformed MAC into one of the highest-quality pure U.S. mall portfolios ($660-per-square-foot sales),” the analyst said. “That said, with activists swirling, the stock lingering at discount, and a previously rejected bid for the company in 2015 not quite forgotten, we think the impending departure clears a significant roadblock here.”

The analyst forecast increased merger probabilities, with a take-private deal being the most likely scenario. 

Price Action

Macerich shares were up 0.33 percent at $57.74 at the time of publication Friday afternoon. 

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