July 7, 2022

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Mill Road calls for a sale of Big Lots. Here’s what we might learn from the firm’s earlier deals

2 min read

A customer exits a Big Lots store in Clifton, New Jersey.

Emile Wamsteker | Bloomberg | Getty Images

Company: Big Lots (BIG)

Business: Big Lots operates as a retailer in the United States. The company offers products under various merchandising categories, such as furniture, seasonal, soft home, consumables and food. As of March 15, 2021, it operated 1,410 stores in 47 states and an e-commerce platform.

Stock Market Value: $977.3M ($34.22 per share)

Activist: Mill Road Capital

Percentage Ownership: 5.14%

Average Cost: $20.10

Activist Commentary: Mill Road Capital is an investment firm focused on investing in and partnering with publicly traded micro-cap companies in the U.S. and Canada. The firm was founded in 2004 by Thomas E. Lynch, who began his investing career at Blackstone. As of their latest 13F filing, Mill Road reported managing $300.74 million across 27 different positions. Mill Road has made 30 previous 13D filings and took Item 4 action in 14 of those situations.

What’s Happening?

On March 15, Mill Road sent a letter to the company’s shareholders announcing that it is calling on the company to pursue a sale, which it believes could happen for $55 to $70 per share (a premium of 72% to 119% over the closing price on March 14). Mill Road also praised the company’s management team and their successful implementation of a strategic plan.

Behind the Scenes:

Mill Road is not an activist investor, and this is far from shareholder activism. Mill Road sent a letter to the company stating that they believe its management team has done a great job over the past several years and has improved the company’s long-term outlook. They specifically cited that: (i) the Broyhill ($700 million in sales) and Real Living ($600 million in sales) brands could each reach over $1 billion in sales, (ii) the e-commerce penetration can go from 5% to 15% over time, and (iii) the long-term growth and margin outlook implies a 150% to 320% increase in annual operating income. Yet, despite this…



2022-04-02 09:04:00

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