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Catalyst Capital Group Inc. has acquired 10.05 per cent of Hudson’s Bay Co., giving the investment firm more leverage to block a $1-billion privatization offer from the retailer’s executive chairman, Richard Baker.

The Toronto-based company said on Monday it has bought 18.5 million shares worth about $187-million through an offer it made last month to minority shareholders. The new shares add to Catalyst’s existing position in HBC, the company said without disclosing its total holdings in the retailer.

Mr. Baker, who has called the Catalyst offer coercive, is leading a coalition of shareholders representing 57 per cent of HBC’s stock in a bid to take the company private. For the privatization to succeed, securities rules require the approval of a majority of the minority shareholders.

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The Catalyst stake increases the odds that Mr. Baker will have to change his offer of $9.45 a share to win the investment firm’s support. Catalyst and some of the other minority investors say HBC is worth more than the privatization offer.

“What it means is that the privatization in its current form is less likely to happen,” said Alex Arifuzzaman, founder of retail real estate adviser InterStratics Consultants Inc. “They will have to raise the price or work with [Catalyst] to sell some assets or do something.”

HBC, which owns its eponymous department store chain across Canada, along with Lord & Taylor and Saks Fifth Avenue in the United States, is trying to survive a changing retail environment. Department store chains like Sears Canada and brands like Target Canada have gone out of business as competition from e-commerce grows.

The Catalyst offer of $10.11 a share expired on Aug. 16. After the news that the investment firm had obtained the 10-per-cent stake, the price of HBC stock rose more than 7 per cent to $10.09, outperforming the Toronto stock index and suggesting investors believe a higher bid will materialize.

It is not clear whether Mr. Baker will change his offer. A spokeswoman for the Baker group declined to comment.

Catalyst, led by financier Newton Glassman, said it is committed to working with HBC directors to “seek out every alternative” to maximize value for all shareholders, whether through a sale process, dividend distributions of the cash to be realized from the sale of the company’s key European assets or otherwise.”

Catalyst has not disclosed what it believes HBC is worth. A spokesman for Catalyst declined to comment.

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Some of the dissident shareholders have publicly said that HBC is worth more than $20 a share and want Mr. Baker to fully divest the company’s European operations, as well as sell or redevelop properties such as its Saks Fifth Avenue building in Manhattan.

Under Mr. Baker’s leadership, the company has taken steps to revitalize its HBC chain, shuttered under-performing Lord & Taylor stores, divested part of its European operations, and sold some of its top real estate properties in Canada and the United States.

But that has not boosted HBC stock back to its 2015 levels of nearly $29 apiece.

“HBC’s retail-real-estate manoeuvres have failed to surface value or put a floor under its stock,” said Kathleen Wong, a senior analyst with Veritas Investment Research Corp. who is recommending that HBC shareholders sell.

So far, dissident shareholders have received some support from a special committee of independent HBC directors evaluating Mr. Baker’s proposal. The committee called the offer “inadequate” in its initial assessment.

The executive chairman’s plan is only a proposal at this stage. The special committee has to issue its final recommendation and the proposed bid must be formalized before shareholders can vote on it.

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