The retail sector, with its oversupply, weak sales growth and heavy exposure to the U.S. real estate market, is turning into a proven winner for hedge fund activists. Don’t expect that to change in 2015, as Wall Street’s most prominent investors position for a few mega retail-sector deals.
When Office Depot ODP NaN% closed its merger with OfficeMax in May and Family Dollar Stores FDO +0.34% announced its sale to Dollar Tree DLTR +0.58% a few weeks later, it looked like two great hedge fund trades were coming to an end. Instead, both nationwide retailers remain favorites for activist investors as they press new ideas that could push shares higher.
In the case of Office Depot, investors want to retry a mega merger of the company with competitor Staples SPLS +0.11%, wrenching out synergies as the office supply stores consolidate their retail footprint and focus on distribution away from stores. Leading the charge is activist fund Starboard Value, which was a driving force behind the Office Depot and OfficeMax merger that paid off handsomely this year as the deal closed after a lengthy Federal Trade Commission review.
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Source: Antoine Gara (www.forbes.com)
