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Richard Baker’s $1-billion offer to privatize Hudson’s Bay – its Yorkdale shopping centre location in Toronto seen here – has the support of shareholders representing 57 per cent of HBC’s outstanding stock.

Christopher Katsarov/The Globe and Mail

As Hudson’s Bay Co.'s executive chairman seeks to privatize the retailer, his company is facing more uncertainty due to problems at one of its partners, WeWork, and further criticism from a dissident shareholder.

Richard Baker’s $1-billion privatization offer has the support of shareholders representing 57 per cent of HBC’s outstanding stock. Those shareholders include WeWork and private-equity company Rhone Capital LLC.

But the money-losing WeWork, the New York-based office-sharing company, was forced to withdraw its initial public offering on Monday and announced plans to focus on its core business after questions about its profitability and its future.

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“With what’s happening with WeWork, there is no way it will be a positive. How much of a negative, depends on what happens with WeWork," said Alex Arifuzzaman, founder of retail real estate adviser InterStratics Consultants Inc.

Mr. Baker partnered with WeWork in 2017, when the co-working company and Rhone Capital agreed to pay $1-billion for HBC’s main Lord & Taylor store in New York. As part of that deal, WeWork and Rhone got stakes in HBC, although the size of their holdings is not known. WeWork also agreed to lease the top floors of HBC’s key department stores in Toronto and Vancouver.

WeWork’s fate could thus have an impact on HBC, said Mr. Arifuzzaman, pointing to their landlord-tenant relationship as one example. “HBC is a landlord. If WeWork goes belly up, [HBC] retains the property. So they can re-lease it. The question is, how much do they charge WeWork and does [WeWork] pay the market rate," Mr. Arifuzzaman said.

The 2017 deal was supposed to be the start of a long-term partnership with WeWork. At the time, HBC said its corporate offices would be “early adopters” of WeWork’s operating platform.

Mr. Baker and his group of shareholders floated the $9.45-a-share plan in June, before WeWork’s IPO collapsed in September. The Baker group was already facing opposition from some of the minority shareholders, including Catalyst Capital Group Inc., which has accumulated a 16-per cent stake in the retailer.

Shares of HBC closed above the bid price at $10.15 apiece on Monday, suggesting investors are wagering a better deal is in the offing.

For any bid to succeed, securities laws require support from the majority of the minority shareholders that the Baker group does not already control.

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Catalyst and private-equity company Sandpiper Group are part of a group of dissidents that opposes Mr. Baker’s plan and believes it grossly undervalues the department-store chain’s real estate properties.

“It’s just my personal view, I think that’s why he wants to buy the company for $9.45 a share, because he knows he can unlock the value for himself and his friends,” said Samir Manji, the CEO of Sandpiper, which owns a small stake in HBC. Mr. Manji would not disclose the size of his stake.

Mr. Manji said Mr. Baker should step down. He echoed another dissident HBC shareholder, U.S. hedge-fund firm Land & Buildings Investment Management LLC, in saying Mr. Baker’s is acting in his own interests and is too conflicted to continue as chairman of the centuries-old company.

Some of the shareholders in the Baker group serve as HBC board members, such as Steven Langman, the co-founder of Rhone, and Eric Gross, a managing partner at WeWork.

Mr. Manji said Mr. Baker’s offer exclusively benefits the executive chairman’s group and is punitive to the remaining minority shareholders.

“How anyone can look at that picture and envision how it is going forward that he should remain as chairman, is beyond me. I say that with no emotion but with an attempt to look at this very objectively as to what is good governance" he said.

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“When you have individuals that have been handpicked by the same chairman that is trying to privatize the company at a massive discount, that is not in the interest of shareholders,” Mr. Manji said.

The Baker group, HBC and WeWork did not respond to a request for comment. HBC’s special committee of the board had been expected to issue a formal evaluation of the privatization plan in September, and the reason for the delay was not immediately known. It had issued a preliminary assessment in August, saying the bid was inadequate.

Sandpiper also supports HBC continuing as a public company as long as it focuses on paying down debt and improving shareholder returns by selling or developing top retail properties such as the company’s Saks Fifth Avenue building in Manhattan.

The Baker plan is only a proposal and a vote will not be scheduled until an offer is formalized.

HBC is a department store chain that owns its namesake brand and Saks Fifth Avenue.

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