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The privatization bid must win the approval of most minority shareholders.Aaron Vincent Elkaim/The Globe and Mail

Hudson’s Bay Co. shares fell on Monday to their lowest in more than five months, a sign some investors are betting a $1.1-billion bid by the executive chairman to take the retailer private could fail to win over minority shareholders.

HBC chairman Richard Baker and his allies warned that the $10.30-a-share bid is their best and last offer, one that reflects the company’s significant financial obligations and its industry’s weak environment. If rejected, investors will be exposed to the risks that the stock will plummet, the group said in a statement.

The bid must win the approval of most minority shareholders. The vocal ones, such as Catalyst Capital Group Inc. and Sandpiper Group, have said they oppose it.

Shareholders are scheduled to vote on the deal on Dec. 17. HBC’s board has recommended that minority shareholders accept Mr. Baker’s bid. The executive chairman has locked up support from shareholders that control 57 per cent of HBC’s shares.

HBC shares fell 2 per cent to $8.92 on the Toronto Stock Exchange, their lowest since Mr. Baker revealed on June 10 that he planned the privatization, hoping to be able to fix the struggling retail operations away from the spotlight of public markets.

Alex Arifuzzaman, founder of retail real estate adviser InterStratics Consultants Inc., reckons the privatization will succeed but pointed out the risk: “There is a material chance it won’t. That is why the stock price is lower.”

Minority shareholders have complained that the offer, albeit increased from the initial proposal of $9.45 a share, does not reflect the value of HBC’s real estate in prime locales such as midtown Manhattan and downtown Vancouver. Last week, the company released appraisals that showed the difficulty in pegging that value, however, due to widely varying property and retail markets.

Sandpiper Group, a dissident investor, reiterated it opposes the bid, saying the majority shareholders’ interests are not aligned with the minority.

“Richard Baker’s real estate monetization and value optimization strategy that he is now pursuing for his and his supporters’ benefit should be executed upon under his and the board’s leadership for the benefit of all owners of HBC,” the real estate private equity company said in a statement.

One major concern, though, is that investors who had bought HBC hoping for a higher bid will suffer big losses if the current one fails.

Catalyst, led by Toronto-based financier Newton Glassman, amassed much of its 17.5-per-cent stake for $10.11 a share. Last week, Reuters reported Catalyst was seeking funding for a potential rival bid​ from banks including Wells Fargo & Co. How that might prompt the majority shareholders to change tack is not known. A Catalyst spokesman was not immediately available to comment.

A source close to the transaction said the major shareholders do not know what Catalyst’s motivation might be, whether it is to bid for the remainder of the minority shares or to seek to also acquire the stake held by the controlling shareholder group.

Mr. Baker’s consortium has been clear it is not interested in parting with its stake, so that raises questions regarding either scenario, the source said. The Globe and Mail is keeping the name of the source confidential because they were not authorized to speak publicly on behalf of the group.

Mr. Baker’s group also includes Rhone Capital LLC, WeWork Property Advisors, Hanover Investments (Luxembourg) SA and Abrams Capital Management LP. It issued a statement on Monday, seeking to hammer home a series of points in support of the offer as the vote draws near.

It said the traditional department-store retail environment is “deteriorating and uncertain” in the face of brisk competition from online rivals such as Inc. HBC has recently divested numerous assets, including its European business and the Lord+Taylor banner, to slim down its operations. However, those moves have come with $875-million “dead rent," including obligations that remain after the closing and restructuring of various businesses in Europe and North America.

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