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Richard Baker at Saks Fifth Avenue in New York, on Nov. 14, 2017. The Baker group’s controlling ownership prevents a rival bidder from acquiring the company.

Michael Falco/For The Globe and Mail

Catalyst Capital Group Inc. pressed its case to regulators on Thursday that Hudson’s Bay Co. did not properly disclose key information about its executive chairman’s plan to privatize the retailer, saying its actions are unfair to minority shareholders.

At an Ontario Securities Commission hearing, Catalyst – which is trying to block HBC executive chairman Richard Baker’s $1.1-billion bid – argued that there are multiple instances in which HBC has withheld or changed information since the announcement of the offer.

They include not disclosing when Mr. Baker started talking to other major shareholders, as well as not being clear that HBC would use capital from its $1.5-billion sale of its Signa European operations to fund the privatization bid.

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“There is the old story and the new story,” Catalyst lawyer Adam Chisholm said.

He described the old story as HBC’s disclosures about the offer dating from the day Mr. Baker and his allies announced their proposal in June to HBC’s filing in November of the documents describing the formal $10.30 a share bid.

The information changed last Friday, Mr. Chisholm said, when the Baker group amended its takeover circular and issued a four-page press release after proxy adviser Institutional Shareholder Services (ISS) excoriated the deal.

For example, he said shareholders may have had the impression that the HBC special committee in charge of evaluating the bid had retained an independent counsel since 2017, when Mr. Baker first floated the idea of privatizing HBC. However, the Friday news release said the independent counsel was only retained in April.

“Sometimes, it is just about what is not said,” Mr. Chisholm said.

An OSC vice-chair pushed back against Catalyst’s suggestion that HBC acted secretively with an 11th-hour change to its circular.

“It is not nefarious that they responded to a public report. Obviously, they have a motivation to respond to it,” Grant Vingoe said.

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Catalyst, the Toronto-based private-equity fund, is asking the OSC to block the offer, or postpone a shareholder vote set for Dec. 17. The dissident shareholder has 17.5 per cent of the shares in HBC and has been an outspoken opponent of Mr. Baker and his offer to buy out the minority shareholders. It complains that the sale process and the formation of the bidding consortium were tainted because not all shareholders were armed with the same information from the start.

The Baker group has 57 per cent of the stock, as well as the blessing of the special committee. Mr. Baker’s partners include Rhone Capital LLC, Hanover Investments (Luxembourg) SA and Abrams Capital Management LP.

For the first two hours of the all-day hearing, Catalyst questioned special committee chair David Leith in painstaking detail on the timeline of the Signa sale, the formation of the special committee, Mr. Baker’s communications to the board and other deal negotiations.

Catalyst took the information gleaned from Mr. Leith’s testimony to make the case that minority shareholders have been left in the dark with HBC’s changing disclosures.

HBC did not have an opportunity to respond before Thursday’s hearing wrapped up for the day. The hearing is set to continue on Friday.

The regulatory process adds a new risk element to the odds of completing the deal.

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HBC, Canada’s oldest company, owns the Hudson’s Bay and Saks Fifth Avenue department-store brands. It has struggled along with much of the bricks-and-mortar retail industry against an onslaught of competition from e-commerce rivals.

An analyst predicted that the Baker group may have to sweeten the bid by as much as 10 per cent to win over minority shareholders. With less than a week before shareholders are scheduled to vote, it is looking increasingly unlikely that minority shareholders will accept the proposal, Canadian Imperial Bank of Commerce analyst Mark Petrie said.

Mr. Petrie believes that Catalyst’s large position, and the recommendation of a No vote from ISS, point to the current proposal coming up short of the necessary support.

“We continue to believe a modestly boosted bid from the majority group should be enough to get the deal done, but at this stage, handicapping probabilities is futile,” Mr. Petrie wrote this week in a research report.

The Baker group’s controlling ownership prevents a rival bidder from acquiring the company. Indeed, Catalyst had proposed an $11-a-share offer, but the HBC special committee ruled that it had no chance of consummation as the controlling shareholders would not sell. Mr. Baker has called the current price “full and final.”

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