Catalyst Capital Group makes rival takeover offer for Hudson’s Bay Co.

Hey there, time traveller!
This article was published 26/11/2019 (1812 days ago), so information in it may no longer be current.

The groups behind competing offers to take Canada’s oldest retailer private engaged in a public war of words Wednesday after Catalyst Capital Group made an alternative offer to Hudson’s Bay Co. shareholders.

“We are pleased to offer all HBC shareholders a superior offer to the flawed and coercive transaction constructed by (HBC executive chairman) Richard Baker,” said Gabriel de Alba, managing director and partner of Catalyst Capital Group Inc., in a statement Wednesday.

Catalyst announced its rival takeover bid at $11 per share in cash, topping the existing offer of $10.30 per share made by a group of investors led by Baker.

HBC confirmed it received the unsolicited proposal and said in a statement its special committee, set up in June to review the initial privatization proposal, will review the offer. It will consult with independent financial and legal advisers, and determine a course of action in the best interests of the company and its minority shareholders, HBC said.

“There can be no assurances that any transaction with Catalyst will occur,” read the statement, which also noted there is no action required from the company’s shareholders at this time.

The shareholder group led by Baker reached a friendly deal with the HBC board last month after it raised its offer from its initial proposal of $9.45 per share.

HBC shares jumped more than 12 per cent on the news of Catalyst’s competing bid, rising about $1.10 to roughly $9.93 in afternoon trading on the Toronto Stock Exchange. They reached an intra-day high of $10.09 earlier in the day.

Catalyst already holds a roughly 17.5 per cent stake in HBC. It announced in October that it and other minority shareholders that together control a 28.24 per cent stake of the company’s common shares plan to vote against the offer by the Baker-led group.

The Baker offer, which is subject to court and regulatory approvals, requires support from a majority of the HBC shareholders, excluding the shareholders behind the bid and their affiliates, as well as approval by a 75 per cent majority vote at a special meeting of shareholders that HBC expects to hold in December.

De Alba said Catalyst’s offer is independently financed, superior in both value and treatment of shareholders and can be completed in a timely manner.

“Catalyst is committed to taking the necessary steps to ensure that its superior offer is evaluated on its merits and that the board is able to liberate itself from the coercive influence of Richard Baker and act for us all,” de Alba said in a statement.

“We are prepared to participate in an open, fair and competitive auction process.”

But the Baker-led group, which calls itself the continuing shareholders, released a statement that called the Catalyst offer “a highly conditional, non-binding and non-executable proposal that is not supported by fully committed financing, and is intended to mislead HBC shareholders.”

The group remains confident shareholders recognize its “all cash, full financed premium offer … provides them with immediate and certain value in a highly uncertain retail environment.” It noted HBC shareholders will get their say on the matter at a special meeting on Dec. 17.

In making its proposal, 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.

“The process around the Baker proposal was riddled with conflicts and rigged by not allowing other offers, set up by Baker to purposefully limit value for minority shareholders,” Catalyst said in a statement.

HBC’s special committee can open the process for Catalyst and other bidders, Catalyst said, noting it is a long-term investor in companies and has the expertise to support HBC.

For the shareholder group “to then complain that their rigged process” resulted in a conditional bid and “frighten” shareholders into accepting a guaranteed $10.30 per share “is not only representative of coercive behaviour and self interest, but the height of shareholder abuse with the threat of ‘more abuse to come” should minority shareholders not agree to the Baker-led bit, Catalyst said in another statement.

The spokesperson for the continuing shareholder group did not immediately respond to a request for comment on Catalyst’s follow-up statements.

Activist investor Land & Buildings expressed interest in the new proposal.

“We continue to believe that the offer from the Richard Baker Group woefully undervalues Hudson’s Bay and its real estate,” said founder Jonathan Litt in a statement, adding he’s encouraged by the news of Catalyst’s offer.

“Land & Buildings is interested in financially participating in this transaction with Catalyst should it move forward.”

This report by The Canadian Press was first published Nov. 27, 2019.

Follow @AleksSagan on Twitter.

Companies in this story: (TSX:HBC)