Battle for Hudson’s Bay Co. heats up

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Battle for Hudson’s Bay Co. heats up

By Marianne Wilson - 11/27/2019
Hudson Bay co.

A new firm wants to take Hudson’s Bay Co. private.

Private equity firm Catalyst Capital Group Inc. has offered to buy Hudson’s Bay Co for C$11-per-share (US$8.29 per share) in deal that values the department store giant at C$2.03 billion ($1.53 billion). The investment group currently owns 32.2 million shares of Hudson’s Bay, which represents about 17.48% of outstanding stock.

The new offer presents a challenge to an already agreed deal with a group of shareholders led by Hudson Bay’s executive chairman Richard Baker. In October, the retailer agreed to a sweetened offer of C$1.9 billion ($1.5 billion) from the Baker-led group, which collectively owns 57% of its shares. The deal, which is subject to court and regulatory approvals, requires approval from a majority of Hudson Bay shareholders (excluding those behind the bid and their affiliates) and approval by a 75% majority vote at a special meeting of shareholders that is expected to be held in December. 

In a release, Catalyst said it is “deeply concerned with the financial terms and structure of the company-sponsored share buyback.” It called the Baker-led offer an “inside issuer bid that is inadequate and undervalues the company on multiple metrics.”

“It has been a revelation to us how far Richard Baker will go to acquire this iconic company for as cheaply as possible, without putting up a penny of his own money,” said Gabriel de Alba, managing director and partner of Catalyst. “Last year insiders disclosed a value of $28per share for the real estate and now they want us to believe that over $2.5 billion of value has conveniently and suddenly disappeared. HBC has not protected its minority shareholders and has allowed its large and sophisticated shareholders, apparently in breach of a standstill and duty of confidence, to create a control position with the benefit of insider information.

Catalyst also filed a complaint with the Ontario Securities Commission regarding the Baker group bid. It alleges the insider issuer offer is the result of a flawed process and asked the regulator to examine the proposal and take appropriate action.

In response to the offer by Catalyst, the "continuing shareholders"  issued the following statement:

“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. 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. Our offer has received the unanimous recommendation of the HBC Special Committee and Board of Directors, and will be put to a shareholder vote at HBC’s special meeting on December 17, 2019.”

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