HBC’s minority shareholders ramp up opposition to privatization bid

TORONTO — The proposed privatization of the Hudson Bay Company could be at risk after a large group of minority shareholders say they intend to vote against the deal approved by the retailer’s board.

The Catalyst Capital Group Inc. announced Thursday that it along with other HBC shareholders that together control a 28.24 per cent stake of the company’s common shares plan to vote against a privatization bid led by the retailer’s executive chairman, Richard Baker.

This represents “a majority of the minority shareholders,” according to Catalyst’s statement.

“The agreement that the company entered into is so fundamentally conflicted, that it shows the amount of leverage (Baker) has over the board and management,” said Gabriel de Alba, managing director and partner of Catalyst, in a statement.

The Baker-led group of shareholders and HBC reached a deal last week to pay $10.30 per share in cash.

The deal is subject to court and regulatory approvals. It also requires approval from a majority of the HBC shareholders, excluding the shareholders behind the bid and their affiliates, as well as approval by a 75 per cent majority vote at a special meeting of shareholders that HBC expects to hold in December.

HBC said at the time that it expects the deal to close in late 2019 or early 2020.

The $10.30 per share offer that the board agreed to is nine per cent higher than an earlier one of $9.45 per share. Catalyst and activist investor Land & Buildings Investment Management both opposed the initial offer.

The HBC board’s special committee said in a statement that the sweetened offer “is in the best interests of HBC and fair to the minority shareholders,” adding that it arrived at that decision after an independent and thorough evaluation process.

“We urge shareholders to review the forthcoming information circular to be filed in the coming weeks, which will include further details and analysis that informed the special committee’s determination, before making any decision,” said the emailed statement.

Catalyst’s De Alba called on the board “to either demand that (Baker) release other members of the Baker Group to consider other options or allow the Baker agreement to expire and run a true sale process.”

“Catalyst is aware of a number of strategic investors that are interested in participating in a process that is open and not constructed to benefit an insider,” he said, adding Catalyst doesn’t doubt the company’s board knows of these parties too.

Catalyst is prepared to be a participant in such a process and work to make an offer to acquire HBC “at terms financially superior” than those of the Baker-led bid.

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