Shares Of Macy's Spike Following Letter By Starboard Value, Notes Real Estate Strategy Could Unlock 'Meaningful And Lasting Value' - Macy's (NYSE:M)

Shares of

Macy's, Inc.M

were trading higher by more than 4 percent on Monday after Starboard Value, an activist investment firm and Macy's shareholder delivered a

letter to the company. Jeffrey Smith, Starboard Value's Managing Member, wrote in the letter that the investment firm remains "frustrated" with Macy's operating performance of late, but "appreciates" recent actions to "re-size" the company's cos structure and store base. Smith went on to reaffirm his belief that Macy's could realize more than $500 million in cost reductions through a combination of improved labor productivity and SG&A reductions. Smith continued that Macy's real estate assets are worth $21 billion alone - implying that the operating business is currently "trading for a negative value." "As we have outlined in our

presentation materials

to you and as discussed with you during our calls and meetings, we believe pursuing JV structures is the most prudent step for Macy's at this time to create significant value for shareholders given the wide discrepancy between the value of the real estate and the current enterprise value of the Company," Smith wrote. "We believe that a JV, or series of JVs, can crystallize the value of Macy's real estate while bringing in a partner with substantial capital and real estate expertise that will enable the JVs to grow and diversify their real estate holdings." Finally, Smith argued that a successful execution of the investment firm's real estate strategy "can create meaningful and lasting value for shareholders."

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