Catalyst Capital Group Inc. is proposing a takeover bid for Hudson’s Bay Co. in an effort to disrupt a plan by the retailer’s executive chairman to take the company private.
Catalyst, the private-equity company led by Toronto financier Newton Glassman, said on Wednesday it is “prepared to consider” offering $11 a share in cash for HBC, which would value the equity in Canada’s oldest company at more than $2-billion.
It has already amassed a 17.5-per-cent stake in the chain known for the Hudson’s Bay and Saks Fifth Avenue banners, and has been vocal in its opposition to the offer from HBC executive chairman Richard Baker and his allies, who control 57 per cent of the stock.
Mr. Baker’s $10.30-a-share bid has the blessing of HBC’s board, and shareholders are due to vote on Dec. 17. To be successful, a majority of the minority shareholders must approve it. Catalyst’s proposal adds a new element of risk to the success of Mr. Baker’s offer.
Catalyst has been in the headlines often, both for its opposition to the Baker-led bid and for an unrelated series of lawsuits Mr. Glassman has launched against business rivals he accuses of corporate espionage. It gained a large foothold at HBC through a mini-tender in the summer, and is now the third-largest shareholder.
Catalyst managing director and partner Gabriel de Alba said the valuation process for HBC was “corrupted” and that Mr. Baker and his allies, armed with insider information, seek to buy out the minority as cheaply as possible. Mr. de Alba said that the value of real estate ascribed in the Baker group bid, at $8.75 a share, is far too low. The controlling shareholders released a set of property appraisals last week, and said they showed the difficulty in arriving at higher values.
“Shareholders deserve and demand better,” he said in a statement.
“Catalyst is committed to taking the necessary steps to ensure that its superior offer is evaluated on its merits and that the board is able to liberate itself from the coercive influence of Richard Baker and act for us all. We are prepared to participate in an open, fair and competitive auction process.”
Catalyst said it has arranged financing, and has “highly confident” letters from two large financial institutions. Its offer would be conditional on due diligence and co-operation from a special committee of the HBC board. It could be put to a shareholder vote by February, Catalyst said.
HBC’s special committee said it would review the proposal with its advisers to determine the best course of action for the retailer and its shareholders, but cautioned there could be no assurance of a transaction with Catalyst.
“This is getting muddier and dirtier with each passing day,” said Brian Madden, portfolio manager at Goodreid Investment Counsel. He said Catalyst had joined the chorus of dissidents saying the initial bid was too cheap, but now it’s a question of whether it wants to own the assets or pressure Mr. Baker into upping the ante.
Shares in HBC jumped more than 11 per cent on the Toronto Stock Exchange on Wednesday, but at $9.83 are still below the Baker group’s bid. That consortium includes Rhone Capital LLC, WeWork Property Advisors, Hanover Investments (Luxembourg) SA and Abrams Capital Management LP.
Another dissident, Land & Buildings Investment Management, said it is “interested in financially participating” if Catalyst proceeds with an offer. Founder Jonathan Litt has been a critic of Mr. Baker and, like Catalyst, contends the Baker group bid undervalues the company’s real estate.
Mr. Baker and his group have been adamant that they are buyers, rather than sellers, of HBC, making the success of any rival bid remote, unless there is some agreement.
“We believe Catalyst’s ‘offer’ is in fact a highly conditional, non-binding and non-executable proposal that is not supported by fully committed financing, and is intended to mislead HBC shareholders,” the group said. “We are confident that HBC shareholders recognize that our all-cash, fully financed premium offer of $10.30 per share provides them with immediate and certain value in a highly uncertain retail environment.”
Meanwhile, Catalyst said it made a complaint about the Baker group bid to the Ontario Securities Commission, alleging that it’s coercive, not devised at arm’s length and designed to preclude alternative offers.
It also questioned the timing of the offer being announced minutes after HBC disclosed it had sold its remaining European joint venture stake for $1.5-billion in June. It suggests members of the bidding group had the sale information, raising questions of fairness, it said. The allegations have not been proved in any hearing.
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Jeffrey Jones