A Hudson's Bay retail location at Toronto's Yorkdale shopping centre is seen on Aug. 19, 2019.Christopher Katsarov
Catalyst Capital Group Inc.'s attempt to block the takeover of Hudson’s Bay Co. by its chairman will go before the Ontario Securities Commission on Thursday.
The regulator said late Tuesday it will hold a hearing on Catalyst’s request for intervention, which came after a special committee of HBC’s board rejected Catalyst’s proposed $11-a-share offer for the struggling retailer a day earlier.
A group led by HBC chairman Richard Baker is offering $10.30 a share for the 43 per cent of the company it does not own. HBC stockholders are scheduled to vote Dec. 17 on the transaction.
Catalyst, led by Toronto financier Newton Glassman, announced late Monday night it had applied for an OSC hearing to review what it said are “numerous omissions and misrepresentations” in the management information circular for the Baker group’s bid. That arrangement won the recommendation of the special committee.
Catalyst said in its application to the OSC that it first raised concerns with the OSC on Nov. 18, three days after the deal circular was filed, and made a formal complaint about the disclosure on Nov. 27. It made its application Monday for the hearing.
Catalyst is seeking to “permanently prohibit” Mr. Baker and his group of shareholders from acquiring any additional shares or amend his offer, and to postpone the Dec. 17 special shareholder meeting.
HBC’s special committee said Monday the Baker Group was unwilling to sell its 57 per cent stake.
In a statement Tuesday, the Baker group laid out its case again, and laid into Catalyst. The group, known legally as Rupert Acquisition LLC (Prince Rupert was the first governor of Hudson’s Bay Co.), said the rejected Catalyst bid is “an illusory offer, intended to mislead minority shareholders [and] manipulate the market.”
The Baker group said Catalyst’s financing assumptions were unrealistic, and even if successful, would lard the company’s balance sheet with too much debt.
Rupert Acquisition said it has filed a complaint with the OSC about Catalyst’s “misleading disclosure” regarding “the adequacy of their publicly stated financing arrangements ... and their purported ‘blocking position’ in respect of our transaction.”
The machinations set the stage for a busy two weeks. If regulators allow the bid to proceed, the sides will then jockey for support from undecided shareholders.
Catalyst owns just under one-third of the 100 million shares of HBC not held by the Baker group. The Baker group needs to get a majority of the votes cast by the other shareholders. Every share left unvoted helps the Catalyst cause.
Catalyst has said it has spoken to shareholders opposed to the transaction and believes there are enough votes to kill the deal – but it hasn’t filed any documents with regulators saying they have voting agreements with them to support the Catalyst position.
Shareholders, who hold a stock that traded as low as $6.22 this year, may ultimately have to decide between retaining ownership in a troubled public company led by Mr. Baker or selling their shares to create a troubled private company led by Mr. Baker.
HBC stock closed at $9.31, down nearly 5 per cent from Monday. The OSC confirmed after the market closed that it would hold the hearing.
Catalyst is among a handful of minority shareholders opposing the bid, saying it undervalues the company’s real estate to the benefit of the executive chairman and his fellow bidders. The group includes Rhone Capital LLC, WeWork Property Advisors, Hanover Investments (Luxembourg) SA and Abrams Capital Management LP.
The Baker group announced a plan to privatize HBC last June, saying the move would allow the company to complete its turnaround of the struggling retail operations away from the attention of public shareholders who have seen their investments dwindle despite a series of asset sales and store closures.
But Catalyst and other minority shareholders have complained that the money on offer does not reflect the value of its properties, some of which are in prime locations such as midtown Manhattan and downtown Vancouver.
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