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Fight over Hudson’s Bay bid heats up as Catalyst, HBC chair file OSC complaints

Richard Baker, the chairman of the Hudson's Bay Company speaks at a Galeria Kaufhof store in Duesseldorf, Germany, 7 April 2017. The mother company of Kaufhof Hudson's Bay Company (HBC) wants to expand in Europe. Photo: Marcel Kusch/dpa | usage worldwide   (Photo by Marcel Kusch/picture alliance via Getty Images)
Richard Baker, the chairman of the Hudson's Bay Company speaks at a Galeria Kaufhof store in Duesseldorf, Germany, 7 April 2017. (Photo by Marcel Kusch/picture alliance via Getty Images)

Catalyst Capital and the shareholder group led by Hudson’s Bay Company (HBC) executive chairman Richard Baker filed complaints against each other, the latest move in the fight to take the company private.

Catalyst is seeking a hearing with the OSC after HBC rejected its bid to take the company private at $11 per share, an offer that topped the $10.30 per share bid made by a group of majority shareholders led by Baker.

The private investment firm wants the OSC to ban the Baker group permanently from acquiring the retailer, or to force HBC to amend its management circular document which allegedly had “numerous omissions and misrepresentations”, and postpone a meeting to vote on the privatization offer.


The Baker group fired back on Tuesday, filing its own complaint with the OSC over Catalyst’s “misleading” disclosures about the bid’s financing, according to a letter that was sent to HBC’s special committee Monday and made public Tuesday.

The letter called Catalyst’s bid “an illusory offer” that is “intended to mislead minority shareholders, manipulate the market, and would only serve to frustrate the opportunity for minority shareholders to receive premium cash consideration for their shares.”

“Catalyst’s reckless financing plans would swiftly add the company to the long list of retailers that have been forced to close their doors, shed jobs and impact pensioners,” the Baker group said in the letter.

HBC’s special committee rejected Catalyst’s proposal, releasing a statement late Monday evening that said the proposal “is not reasonably capable of being consummated.” The Catalyst proposal would require support from at least 75 per cent of shareholders in order for it to pass. With the Baker group not interested in supporting the Catalyst bid, HBC said “the transaction is incapable of being completed.”

Richard LeBlanc, a professor of governance, law and ethics at York University, said in an interview with Yahoo Finance Canada that the structure of HBC’s board of directors and the powerful role Baker plays within the company raises questions about conflicts of interest.

“You don’t often see a competing bid being rejected. It attracts scrutiny,” LeBlanc said.

“The problem is you have a very high concentration of power because you have a significant shareholder who is on the board and is also in management. That’s the perfect storm. That is a huge concentration of power in any company.”

LeBlanc says HBC’s board should have a non-executive chair of the board who has no affiliation with any significant shareholders.

HBC formed the special committee, which includes five of HBC’s independent directors, in June to analyze the Baker-led bid. Last month, after reviewing the offer and valuation of the company with advisor services from JP Morgan, TD Securities, and Centerview the committee concluded accepting the bid was “the best path forward for HBC.” The committee also released a 217-page information circular detailing its decision process. A spokesperson for the special committee declined to comment for this story.

HBC’s board of directors accepted the majority shareholder offer last month, which represented a nine per cent increase from its initial offer of $9.45 per share. David Leith, the chair of the special committee, said the offer “provides immediate and fair value” to the company’s minority shareholders.

Catalyst owns approximately 17.5 per cent of outstanding HBC shares and has previously said it plans on voting against the Baker bid, calling it “inadequate” and one that undervalues the company.

Baker and the group of majority shareholders hold approximately 57 per cent of outstanding HBC shares and need support from a majority of minority shareholders in order to get the offer approved. A vote on the privatization offer is scheduled for Dec. 17.

Ed. note: This story has been updated to reflect a retraction of statements by Richard Leblanc to Yahoo Finance Canada that the special committee was lacking in disclosure and transparency. Those comments did not accurately represent the disclosure contained in the Management Information Circular regarding the proposed Baker bid, which was issued by the special committee on November 14, 2019.

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