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Catalyst Comments on Glass Lewis's Recommendation to Hudson's Bay Company Shareholders

  • Glass Lewis Ignores the Central Issues of How the Baker Group was Formed and Misleading and Incomplete Disclosures, Which Created a Flawed Process and a Coercive Transaction

  • ISS Correctly Identified Numerous Issues and Conflicts, Including Lack of Disclosures and Defects in Sales Process, by Richard Baker, the Insider Group and the HBC Board of Directors

TORONTO, Dec. 11, 2019 /CNW/ - The Catalyst Capital Group Inc., on behalf of investment funds managed by it, ("Catalyst") today commented on the recommendation by Glass Lewis to Hudson's Bay Company (TSX:HBC.TO - News) ("HBC" or the "Company") shareholders in regards to the Company-sponsored share buyback (the "Insider Issuer Bid") outlined in the October 20, 2019 arrangement agreement (the "Baker Group Agreement") between insiders led by Mr. Richard Baker (the "Baker Group") and the Company.

Gabriel de Alba, Managing Director and Partner of Catalyst, said, "Glass Lewis ignored all of the issues related to the creation of the Baker Group and buys into the threat that the take under proposed by that group is the only option. It is somewhat shocking that they would turn a blind eye to all of the conflicts, manipulations and intentionally misleading and incomplete disclosures, particularly in this day and age."

Added Mr. de Alba, "ISS recognized these issues and called out the HBC Board and the insider group, led by Executive Chairman Richard Baker, for their egregious pattern of conflicts, misrepresentations and self-serving games. HBC's independent directors need to step up and do their duty to protect shareholders and restrict the coercive and questionable efforts of Richard Baker. We continue to maintain our superior offer and believe there are other alternatives to maximize shareholder value. If the Board will not act in the best interest of all shareholders, Catalyst is prepared to seek Board change to ensure that the interests of minority shareholders are protected."

In its December 6, 2019, report, ISS recognized the significant flaws with respect to the sale process, questioned the value of the Special Committee's contribution and lack of optionality the Special Committee created for the Company and concluded that there is no legitimate rationale for recommending the Insider Issuer Bid in light of a legitimate outstanding offer at a higher price.

In its report ISS made the following conclusion and recommendation:1

"Catalyst Capital Group Inc., holder of 17.5 percent of common shares, has publicly opposed the transaction and has made an offer to acquire the remaining outstanding shares for $11.00 in cash per share. The only defect identified by the board's special committee with the competing bid has been the opposition to Catalyst's offer from the continuing shareholders (who are likewise seeking to acquire the company, but at a lower price); the committee has not questioned the Catalyst proposal's financing or ability to win regulatory approval."

"Given that significant defects have been identified with the sale process, shareholders cannot be confident they are receiving maximal available value for their shares. Although the special committee appears to have restricted its own ability to determine that $11.00 is in fact superior to $10.30 by agreeing to a narrow definition of a 'superior proposal' in the arrangement agreement, there is no legitimate rationale from a governance perspective for recommending that shareholders accept C$10.30 cash per share in light of what appears to be a legitimate outstanding offer to purchase the company at a higher price. As such shareholders are advised to vote AGAINST the acquisition by the continuing shareholders."

Regarding the Special Committee, ISS said:

"It appears that the special committee handcuffed itself by recommending an agreement that defines a superior proposal as something that could never happen. If there is i) a controlling shareholder group that will not agree to sell its shares to any other party or allow the distribution of the proceeds from a sale of material assets, and ii) the special committee defines a superior proposal as one that is reasonably capable of being completed, and iii) agreement from the controlling shareholder is a necessary element of completing an alternative transaction, then shareholders must question whether the special committee has effectively tied its own hands."

"However, HBC was not a controlled company prior to the board's waiver of the Fabric standstill. In fact, Baker's individual holdings account for 6.3 percent of HBC shares outstanding. By waiving the standstill and allowing Baker to form a group controlling 58 percent of the voting power, the board appears to have sacrificed negotiating leverage in exchange for a proposal, in its own words, was inadequate."

Regarding Fabric Luxembourg (member of the Baker Group), ISS said:

"On Oct. 26, 2017, HBC shareholder Fabric Luxembourg entered a standstill agreement that limited its interest in HBC to no more than 45 percent of outstanding common shares. The standstill agreement was confirmed most recently on July 17, 2018. In engagement with ISS, the special committee indicated that Fabric Luxembourg sought HBC's consent for its participation in the shareholder group. The board (with authorization from the special committee) waived the standstill at some point between March 26 (when the special committee was re-formed) and June 10 (when the C$9.45 proposal was made). Although the board has acknowledged to ISS that it granted the standstill waiver, investors who purchased shares prior to June 10, under the impression that Fabric Luxembourg was subject to a standstill, would likely have benefited from knowing when Fabric Luxembourg began considering a buyout and when the standstill was waived."

Regarding the Baker Group and the Signa transaction, ISS said:

"The initial unsolicited proposal was revealed on June 10, shortly after HBC announced its agreement to sell its portion of the European operations and assets it shared with SIGNA. In light of i) the materiality of the SIGNA transaction onto HBC's value, ii) the possible conflict of interest between Baker as executive chairman voting on an asset sale and Baker as unsolicited acquirer, and iii) the absence of a positive disclosure that members of the continuing shareholder consortium had no knowledge of the SIGNA transaction, it is reasonable that shareholders could question whether material nonpublic information was used to assemble the consortium of continuing shareholders. This concern must then necessarily lead to questions about the thoroughness of the sale process and whether the agreed transaction maximizes value for minority shareholders."

Catalyst has filed a notice of application for a hearing with the Ontario Securities Commission seeking redress for inadequate and inaccurate disclosure, and coercive and unfair practices leading up to and following the HBC Board approval of the Insider Issuer Bid.

We urge shareholders to VOTE AGAINST the Insider Issuer Bid and all related proposals to be voted upon at the HBC shareholders' meeting scheduled for December 17, 2019 (the "Meeting"). Your vote matters.

We thank shareholders for their strong support to date. The rejection of the Insider Issuer Bid is a key step for the maximization of shareholder value. Notwithstanding the threats of Mr. Richard Baker and the Company regarding declining share prices if we reject their proposal, we can act together to enhance shareholder value.


If you have any questions, or need help executing your vote, contact Laurel Hill Advisory Group at: 1-877-452-7184 or 1-416-304-0211 or email There is a team standing by to assist you.

Additional Information

Catalyst is relying on the exemption under section 9.2(4) of National Instrument 51‐102 ‐ Continuous Disclosure Obligations to make this public broadcast solicitation. The following information is provided in accordance with corporate and securities laws applicable to public broadcast solicitations. This solicitation is being made by Catalyst, and not by or on behalf of the management of HBC. Laurel Hill Advisory Group will receive a fee of $50,000 for its services as Information Agent plus ancillary payments and disbursements. Based upon publicly available information, HBC's registered office is at 401 Bay Street, Suite 500, Toronto, Ontario, Canada M5H 2Y4 and its head office is at 8925 Torbram Road, Brampton, Ontario, Canada L6T 4G1. Catalyst is soliciting proxies in reliance upon the public broadcast exemption to the solicitation requirements under applicable Canadian corporate and securities laws, conveyed by way of public broadcast, including press release, speech or publication, and by any other manner permitted under applicable Canadian laws. In addition, this solicitation may be made by mail, telephone, facsimile, email or other electronic means as well as by newspaper or other media advertising and in person. All costs incurred for the solicitation will be borne by Catalyst. A registered shareholder who has given a proxy may revoke the proxy before it has been exercised by: (i) completing a proxy form that is dated later than the proxy form being revoked and mailing or faxing it to TSX Trust Company so that it is received before 10:00 a.m. (Toronto time) on December 13, 2019 or, if the Meeting is adjourned or postponed, 48 hours prior to the time of the Meeting (excluding Saturdays, Sundays and holidays); (ii) sending a revocation notice in writing to the Corporate Secretary of the Company at its registered office so that it is received at any time up to and including the last business day before the date of the Meeting (the notice can be from the shareholder or the authorized attorney of such shareholder); (iii) making a request in writing to the chair of the Meeting that its proxy be revoked; or (iv) any other manner permitted by law. A non‐registered shareholder may revoke a form of proxy or voting instruction form given to an intermediary at any time by written notice to the intermediary in accordance with the instructions given to the non-registered shareholder by its intermediary. Non-registered shareholders should contact their broker for assistance in ensuring that forms of proxies or voting instructions previously given to an intermediary are properly revoked. None of Catalyst and its directors and officers, or, to the knowledge of Catalyst, any associates or affiliates of the foregoing, has any material interest, direct or indirect, in any transaction since the commencement of HBC's most recently completed financial year, or in any proposed transaction which has materially affected or will materially affect HBC or any of its subsidiaries, other than as set out herein. None of Catalyst or, to its knowledge, any of its associates or affiliates, has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter to be acted upon at any upcoming shareholders' meeting, other than as set out herein.

Shareholders with questions or who need assistance with their proxies can contact the Information Agent:

Laurel Hill Advisory Group
North America Toll Free: 1-877-452-7184
Collect Calls outside North America: 1-416-304-0211

1 Permission to quote from ISS' report was neither sought nor obtained.


Certain statements contained in this press release, including statements regarding Catalyst's commitment to taking steps to change the composition of the board of directors of HBC, Catalyst maintaining its superior offer and the shareholders of HBC acting together to enhance shareholder value, contain "forward-looking statements" and are prospective in nature. Forward-looking statements are not based on historical facts, but rather on current expectations and projections about future events, and are therefore subject to risks and uncertainties that could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of forward-looking words such as "plans", "expects", "intends", "anticipates", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved. Although Catalyst believes that the expectations reflected in such forward-looking statements are reasonable, such statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Material factors or assumptions that were applied in formulating the forward-looking information contained herein include the assumption that Catalyst will be able take steps to change the governance of HBC by installing independent directors, the assumption that Catalyst will be able to secure the necessary financing to complete its proposed offer, that shareholders will successfully oppose the Insider Issuer Bid, the business and economic conditions affecting HBC's operations will continue substantially in the current state, including, without limitation, with respect to industry conditions, general levels of economic activity, continuity and availability of personnel and third party service providers, local and international laws and regulations, foreign currency exchange rates and interest rates, inflation, and taxes, and that there will be no unplanned material changes to HBC's facilities, operations and customer and employee relations. Catalyst cautions that the foregoing list of material factors and assumptions is not exhaustive. Many of these assumptions are based on factors and events that are not within the control of Catalyst and there is no assurance that they will prove correct. Important factors that could cause actual results, performance or achievements to differ materially from those expressed or implied by such forward-looking statements include, among other things, actions taken by HBC or the Baker Group with respect to the Insider Issuer Bid and agreements entered into among HBC and the Baker Group, Catalyst's ability to secure the necessary financing to complete the Catalyst offer (which financing is subject to customary conditions including satisfactory due diligence), Catalyst's ability to install independent directors, industry risk and other risks inherent in the running of the business of HBC, foreign currency exchange rates and interest rates, general economic conditions, legislative or regulatory changes, changes in income tax laws, and changes in capital or securities markets. These are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of Catalyst's forward-looking statements. Other unknown and unpredictable factors could also impact its results. Many of these risks and uncertainties relate to factors beyond Catalyst's ability to control or estimate precisely. Consequently, there can be no assurance that the actual results or developments anticipated by Catalyst will be realized or, even if substantially realized, that they will have the expected consequences for, or effects on, Catalyst or HBC and their respective future results and performance. Forward-looking statements in this press release are based on Catalyst's beliefs and opinions at the time the statements are made, and there should be no expectation that these forward-looking statements will be updated or supplemented as a result of new information, estimates or opinions, future events or results or otherwise, and Catalyst disavows and disclaims any obligation to do so, except as required by applicable law.


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SOURCE The Catalyst Capital Group Inc.

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