Taubman will face a formidable foe in Elliott

Activist hedge fund has bought a 3.8 percent stake in the luxury mall giant

Taubman has been controlled by its founding family for almost 70 years

They've seized an Argentinian warship and picked a fight with Warren Buffett.

But no one outside the two companies knows exactly what Paul Singer's Elliott Management Corp. is seeking from Bloomfield Hills-based Taubman Centers Inc. now that the activist hedge fund has bought a 3.8 percent stake in the luxury mall giant.

Yet one thing is certain: It's likely to be a warpath Elliott marches as Taubman (NYSE: TCO), which has been controlled by its founding family for almost 70 years, battles the New York City-based fund at the same time it faces arrows from another activist investor, Jonathan Litt of Connecticut.

"Singer doesn't care if you hate him. He doesn't care if you hang him in effigy," said Erik Gordon, clinical assistant professor at the University of Michigan Stephen M. Ross School of Business. "His goal is to push companies, and even countries, into making changes that create wealth. That's it. That's all he cares about."

Elliott, which launched a bitter takeover attempt of Compuware Corp. from 2012-14, is believed to be seeking changes that could include taking Taubman private or a sale, according to Bloomberg, which first reported Elliott Management's stake in Taubman last week.

That could even include the eviction of the pioneering mall company's founding family from their namesake company.

For Michael Mazzeo, dean of the School of Business Administration at Oakland University, just the fact that Elliott Management even disclosed its 3.8 percent stake at all when it wasn't legally obligated to — that's not required until a 5 percent stake is achieved — is telling.

"They are signaling that they are in play," said Mazzeo, who specializes in mergers and acquisitions. "While it's not really clear what they are seeking at Taubman, since there are two competing aggressors in this case, that would suggest that this company is undervalued. They may be taken over and then split apart, or they may keep what's good and sell what's bad."

Part of the concern about Taubman, which declined comment for this story, has been that its stock prices haven't reflected its asset performance.

The company's stock has fallen by 21.48 percent in the last 13 months, from $71.17 the day Litt's takeover bid was revealed in October 2016 to $55.88 on Nov. 15, the day after Elliott Management's bid was. To be sure, stock prices for other major mall real estate investment trusts have fallen, substantially underperforming the S&P 500, but not as much as Taubman's, Bloomberg reported.

That's even as the company handily dominates its peers in key performance measurements like sales per square foot; Taubman's malls have $802, while its nearest competitor, Macerich Co., is $659, according to Bloomberg.

"When a company comes in the crosshairs of Elliott and Paul Singer, that company most likely will succumb to Elliott," Sudip Datta, T. Norris Hitchman endowed chair and professor of finance in the Mike Ilitch School of Business at Wayne State University, said in an email.

"He will eventually most likely succeed in this battle, substantially restructure the board and change management. … Taubman may be forced to go private to restructure and then go public again when it gets its act together. There is substantial board and management changes in the cards for Taubman."

Alex Calderone, managing director of Birmingham-based corporate advisory firm Calderone Advisory Group, said Elliott thinks it can do better.

"(Elliott has) formulated an investment thesis that assumes shareholder value will increase by shifting control away from the incumbent leadership team … but we don't yet know what they want," Calderone said. "Is it something short of (CEO, president and board chairman Robert) Taubman stepping down? Do they want the company sold? It's too early to tell."