A small New York investment firm has filed a lawsuit against Hudson’s Bay Co. and its chairman, Richard Baker, over Mr. Baker’s attempt to take the retailer private – the latest bit of wrangling in a contest that’s only expected to heat up in the coming days.
Ortelius Advisors LP is asking for an injunction blocking Mr. Baker’s group from acquiring stock in the deal, which is slated to go to a shareholders vote on Dec. 17. Its lawsuit, filed in Ontario Superior Court, runs parallel to a hearing scheduled Wednesday before the Ontario Securities Commission where Catalyst Capital Group Inc. is also challenging the transaction.
In the Dec. 17 contest, Mr. Baker’s group must win a majority of the votes cast among minority shareholders. Catalyst owns about one-third of the 100 million minority shares.
Ortelius says it owns 876,450 shares of HBC, or about 0.5 per cent of the company, acquired in transactions starting in 2017. The firm, which includes Pavlos, Crown Prince of Greece, as a partner, says it’s an activist hedge fund that looks for companies whose “sum-of-the-parts is worth significantly more than the current market price.”
In the lawsuit, Ortelius says it invested based on Mr. Baker’s repeated representations that HBC’s real estate was worth more than its stock price. But now, Ortelius says, HBC is understating the true value of the property and presenting “misleading negative views” of the company’s prospects.
The company and the Baker group were unable to comment on the lawsuit Friday afternoon.
Peter DeSorcy, managing member of Ortelius, said in a news release that Mr. Baker was “inexorably compromised” once he sought to buy the company in the spring of 2017, his first attempt at a privatization. “His interests were no longer aligned with minority investors in maximizing shareholder value but in minimizing the purchase price for the continuing shareholders.”
Mr. Baker’s group, which owns 57 per cent of the company, is offering $10.30 a share in cash. The bid has the blessing of the HBC board’s special committee. On Monday, the committee rejected Catalyst’s own $11-a-share proposal, saying it could not proceed because the Baker group would not sell.
Ortelius argues the special committee can’t fulfill its role of protecting the interests of minority shareholders because the Baker group’s stance that it will not sell its stake “ensures that only their proposal can ever be considered. … The insiders had all the leverage.”
Mr. Baker’s group continued its campaign Friday, releasing a presentation that said if HBC stockholders vote no, they are choosing “to remain minority shareholders in a public company with considerable risk, uncertainty, low liquidity and high volatility.”
In an interview this week, David Leith, the HBC board member who chaired the special committee that ultimately recommended the Baker group bid, called its statement that it would not sell its shares “a gating issue” that Catalyst understood. “It’s gotten a bit lost that HBC was not put up for sale.”
Catalyst has called the process flawed and coercive. It wants the OSC to block the Baker group bid, or force it to amend its takeover information circular to add details that it claims were misrepresented or omitted. The OSC has yet to decide whether Catalyst has legal standing for its claim.
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