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The Ontario Securities Commission ruled on Friday that Hudson’s Bay Co. must delay a shareholder meeting on its executive chairman’s $1.1-billion privatization offer even as early voting appeared to show that the plan failed to win enough support.

The meeting on the $10.30-a-share offer from chairman Richard Baker and his allies was set for Dec. 17, but minority shareholders submitted enough proxies against the contentious proposal by Friday to vote it down, according to one report. Reuters, quoting unnamed sources, reported that the Baker group, which controls 57 per cent of HBC stock, failed to persuade the required majority of the minority holders to tender the bid.

The results filtered out just before the OSC ruled at a hearing late Friday that HBC must delay the meeting until after the company files an amendment to its formal bid documents. Those amended documents must include additional information that was contained in a Dec. 6 news release.

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Dissident shareholder Catalyst Capital Group Inc. had been granted the hearing so it could air several concerns it has about the formation of the Baker group earlier this year and the company’s sale process.

OSC lawyers told the hearing they did not believe the bid should be blocked, but noted that investors should have the opportunity to examine documents related to the proposal that are not inaccurate or misleading before making their decision.

Still, the Baker group may be forced to sweeten its offer to win over support for the bid, if indeed shareholders are not prepared to back it as currently structured. Other options for Mr. Baker may include going ahead with it as it stands and dealing with the consequences, or scrapping the proposal altogether. Shareholders have the option of changing their votes up until the meeting.

A spokesman for the group, which also includes Rhone Capital LLC, Hanover Investments (Luxembourg) SA and Abrams Capital Management LP, had no immediate comment on the vote count. An HBC representative was not immediately available to comment.

Mr. Baker aims to remove the struggling retailer, owner of the Hudson’s Bay and Saks Fifth Avenue chains, from public markets so it can continue its turnaround efforts without having to report back to investors every three months. Catalyst, which has a 17.5-per-cent stake in HBC, and other dissidents including Land & Buildings Investment Management and Sandpiper Group have said they oppose Mr. Baker’s proposal because it did not offer enough value, especially for the retailer’s real estate portfolio.

Catalyst had alleged at the OSC hearing that minority shareholders have been put at a disadvantage due to HBC’s misleading disclosures and the conduct of the special board committee in charge of evaluating the deal. It contends that HBC acted secretively and changed its tune with a four-page press release Dec. 6 and said the circular had to be amended formally.

HBC lawyer Seumas Woods called Catalyst’s claims “nonsense.” Over the course of two hours, Mr. Woods sought to bat down Catalyst’s barrage of complaints. He said HBC provided shareholders with additional disclosure, when it released a four-page press release Dec. 6 with more details on how the deal was negotiated and why HBC granted one of the large shareholders a waiver to a standstill agreement so it could participate in the deal.

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But OSC staff provided an example of unclear disclosure. The mid-November takeover circular said the special committee was formed March 27 with a mandate to review and evaluate options for HBC’s Lord & Taylor business unit and its European retail and real estate operations. But in the Dec. 6 press release, the mandate had been expanded to include the possibility of privatization.

“Those different statements leave investors in a state of confusion," OSC staffer and litigator Rikin Morzaria told the commissioners.

Mr. Woods said, “Conceptually that’s fine” if the commission decides to follow the staff recommendation to issue a new circular. But he said he did not think minutes from board meetings and the special committee meetings were required, nor a staff review of the revised circular, as OSC staff recommended.

“That sends a message that the special committee did not do their job properly,” said Mr. Woods, adding that it suggests that people “have their hands caught in the cookie jar.”

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