The chairman-led shareholder group planning a $1-billion take-private offer for Hudson’s Bay Co. says Catalyst Capital Group Inc.’s bid for minority shares threatens to deprive other investors of a chance to cash out.
The group, led by HBC executive chairman Richard Baker, called Catalyst’s $150-million bid for shares “coercive,” noting that it is due to expire on Aug. 16. That is before the HBC special board committee is expected to issue a ruling on the fairness of Mr. Baker’s offer.
His group, which controls 57 per cent of the shares in the department store chain, has bid $9.45 a share for the remainder. Catalyst, led by Toronto-based financier Newton Glassman, has said it wants to buy up to 14.8 million shares, or roughly 15 per cent of the minority holdings, for $10.11 apiece.
Catalyst has said it intends to vote against the privatization bid, as have other shareholders such as Land & Buildings Investment Management LLC and Sandpiper Group. Each argues that the offer undervalues HBC’s real estate holdings.
Catalyst’s offer “is designed solely to prevent our whole-company transaction from occurring, and thereby deprive minority shareholders of the ability to receive a substantial cash premium for their full investment in HBC,” Mr. Baker said in a letter to the special committee. His consortium also includes Rhone Capital LLC and office-sharing company WeWork Property Advisors.
The group has said that HBC’s retail operations are struggling to become profitable in a deteriorating business environment that is being disrupted by the move to online shopping. As a result, efforts to turn around its fortunes would be accomplished more easily as a private company with “patient capital,” he said.
“It is also important to recognize that, absent a whole-company transaction such as the one we are proposing, there is a real and significant risk that HBC’s stock price falls back to levels comparable to where the stock was trading prior to the announcement of our privatization proposal,” Mr. Baker said.
Before the privatization offer was announced in early June, HBC shares sold for $6.37 each on the Toronto Stock Exchange. They slipped 3 cents to $9.79 on Thursday.
When it announced its offer last week, Catalyst said it believed the major shareholders were seeking to buy out the minority at a price that is well below the fair value of Canada’s oldest corporation.
The special committee of five HBC directors has invited the minority shareholders to talk about the proposal and to discuss any alternatives. It said it would examine Catalyst’s bid as part of its deliberations.
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Jeffrey Jones