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Speculation swirls after DDR CEO's abrupt termination

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Speculation swirls after DDR CEO's abrupt termination

's abruptterminationof CEO David Oakes hasleft investors and analysts reeling and guessing at the company's rationale.

DDR remainstight-lipped on the matter. A company spokesperson, in an email, would onlyemphasize the fact that Oakes' departure "was not related to the Company'sfinancial or operating results or to any disagreements or concerns regardingthe Company's financial or reporting practices."

Citing conversations with the company, Evercore ISI's SteveSakwa and Samir Khanal said in a July 11 note that Oakes' departure was "eventdriven."

"Like the rest of the investment community, we weresurprised by Mr. Oakes's exit, given that the Board had just signed a long termcontract with him in mid-May," the two said, rating the company at "hold."

Otheranalysts deduce that Oakes' termination was possibly the result of a "personal"or "conduct" issue. A disagreement between management and the boardover company strategy — or even something more significant like a prospectivecompany sale — would not have resulted in an abrupt termination withoutseverance, they said.

"Idon't want to speculate, but you can run the process of elimination,"Mizuho Securities USA Inc. analyst Haendel St. Juste said in an interview. "Onceyou go through the process of elimination, the things that a CEO gets firedfor, with immediate effect and with no severance, tend to be a shorter list ofcircumstances."

DeutscheBank analyst Vincent Chao had a similar read.

"Itdoes seem like there's not a lot of information out there, as far as we cantell," he said. "Some sort of conduct issue seems like it would belikely, given the circumstances of the termination, as well as the lack ofseverance. But I'm not going to speculate as to what exactly it was."

Mizuho'sSt. Juste, who downgraded the company to "underperform" from "neutral"in a July 11 write-up on an anticipated lack of visibility on management andstrategy, said the matter over which Oakes was terminated would have had tohave been significant, given how the shake-up would be perceived in the market,and in light of the protracted process that surrounded Oakes' appointment afterformer CEO Daniel Hurwitz steppeddown. A considerable length of time passed before Oakes was offeredthe job and received a contract.

"Noone saw this coming," St. Juste said, "So this isn't a matter of 'You'renot doing a good job' or 'We're going to give you a couple of warnings andfinally you didn't do well enough and you're gone.' If that were the case, itprobably would have resulted in a severance, I would think."

St.Juste noted that he has been "bombarded" by calls from investorsconfused by Oakes' departure. The analyst in the interview expressed praise forOakes' thoughtfulness, intelligence and personability in his time at thecompany.

DDR's stock, curiously, was up nearly 3% in July 11 trading.Analysts guessed the share price gain may be due to the fact that August, Oakes'replacement, is a seasoned REIT veteran with a history of shepherding companiesthrough big deals favorable to shareholders. St. Juste described August assomeone people "know, like and respect."

Others speculate that a prospective M&A deal might nowbe on the table.

"Somefolks think maybe a sale of the company is on the table at this point," Chaosaid. "Tom [August] obviously has experience selling companies in thepast."