Don't Mess

yeah that's right. don't mess with Canadian Tire. BOOYA!

exerpt taken from thestar.com:

Canadian Tire would test N.Y. investor
Structure makes it harder to shake up
This is no HBC, analysts tell Ackman
May 26, 2006. 06:55 AM
DANA FLAVELLE
BUSINESS REPORTER

Before New York investor William Ackman gets any closer to messing with Canadian Tire Corp., he would do well to study the popular retailer's unusual ownership structure.

Ackman, whose Pershing Square Capital Management LP invests in companies to shake them up, raised eyebrows this week when he told a well-heeled New York investment conference that Canadian Tire is his "favourite" stock pick.

But if the U.S. hedge fund owner thinks he can easily boost the retailer's share value by pushing it to sell off its real estate assets, credit card business, gas stations or clothing stores, he may be in for a surprise, company observers said yesterday.

The 74-year-old retailer's unusual ownership structure and operating model make it very difficult to take over or split up, experts said.

"If any hedge fund operation looks at HBC or Sears and thinks they can do the same at Canadian Tire, they're in for a bit of a shock," said Laurence Booth, a professor at the University of Toronto's Rotman School of Management.

Both Hudson's Bay and Sears, which like Canadian Tire are large national retailers, have cut staff and sold off their credit card business since being taken over by American financiers.

But HBC stock was widely held before Jerry Zucker acquired the company, and Sears was already majority owned by the U.S. firm that Ed Lampert took over.

In contrast, Canadian Tire has a two-tier share structure that puts most of the financial ownership in the hands of the public, but all of the control in the hands of the founding family and the authorized store dealers, who own their own stores.

Martha Billes, whose father A.J. Billes co-founded the business with his brother in 1922, controls 61 per cent of the voting stock with her only son, Owen. The dealers own 20.5 per cent and another 12.2 per cent is in a deferred profit-sharing plan.

Even if Ackman were able to acquire a substantial number of the non-voting shares, it's unclear how he would force the voting shareholders to make any changes in the business.

In any case, it's far from certain that Canadian Tire shares would be worth more if the company was split up, analyst Perry Caicco, with CIBC World Markets, said in a note to clients yesterday.

"Most of the `hidden' value (is) already in the share price," Caicco said, who estimates the credit card business is worth $15 a share while the stores, converted to an income trust, would yield $55 a share, for a total of $70 a share.

As the stock is already trading above $68, he noted, there isn't much to be gained from the move. Canadian Tire owns about 70 per cent of its real estate, which is valued at $2.7 billion, Caicco also wrote. But selling the land would affect the company's ability to renovate and expand the stores in response to market conditions and create a new cost — rent.

"Canadian Tire is a very different animal and is difficult for foreign investors to understand," Caicco said. "Like double-doubles, Mike Myers and CFL football, at first it doesn't make much sense. But after a while it hits — this is a great business with a strong direction that the Canadian market values appropriately."