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Hudson's Bay Company (HBC.TO)
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By Jessica DiNapoli and Greg Roumeliotis
(Reuters) - Saks Fifth Avenue owner Hudson's Bay Co has fallen short of securing enough shareholder support for a C$1.9 billion($1.4 billion) deal to take the department store operator private, people familiar with the matter said on Friday.
A buyout consortium of Hudson's Bay investors led by its Executive Chairman Richard Baker did not win enough votes from other company shareholders by a Friday morning deadline in advance of a Dec. 17 special meeting, the sources said.
The sources cautioned that shareholders are allowed to change their mind up to the time that the special meeting of shareholders is held, however.
The Ontario Securities Commission (OSC) regulator on Friday said Hudson's Bay has agreed to postpone the Dec. 17 meeting. It was not immediately clear when this would now be held.
The OSC also dealt Baker another setback by ordering Hudson's Bay to revise the disclosures it made to its shareholders on Nov. 14 on how the deal with Baker was put together.
Representatives for Hudson's Bay and Baker's consortium did not respond to requests for comment.
Baker has argued that Hudson's Bay would be better positioned as a privately held company to face the brick-and-mortar retail sector's challenges, shielded from the demands and concerns of stock market investors amid the rising popularity of online shopping.
While Baker's offer would pay Hudson's Bay shareholders a 62% premium to the value of their stock prior to his bid being announced, it values the company at just a third of its 2015 worth. That has triggered opposition from some Hudson's Bay investors, including Canadian private equity firm Catalyst Capital Group Inc and hedge fund Ortelius Advisors LP.
The buyout consortium has 57% voting control over the company, but a majority of the shareholders not involved with Baker's consortium must approve the offer for the deal to be completed.
Catalyst, which owns roughly 17.5% of the retailer, made an offer of C$11.00 per share for Hudson's Bay that a special board committee negotiating on behalf of the company rejected because Baker's consortium said it was not willing to allow the sale of the company to another party.
Hudson's Bay's agreement to sell itself to Baker's consortium is for C$10.30 per share. An independent valuation report by real estate services firms CBRE Group Inc and Cushman & Wakefield Plc valued Hudson's Bay real estate at $C8.75 per diluted share, helping Baker's push to convince the special board committee to a deal closer to his offer.
Hudson's Bay shares ended trading up 2.7% at C$8.88 in Toronto on Friday.
(Reporting by Jessica DiNapoli and Greg Roumeliotis in New York; Additional reporting by Svea Herbst-Bayliss in New York; Editing by Nick Zieminski, Tom Brown and Sonya Hepinstall)
Baker bars journalists from annual shareholders' meeting. What a piece of work
Too much pay, not enough say: Why so many HBC investors are balking at Baker’s plan
Jeffrey Jones Mergers and Acquisitions Reporter
Published June 20, 2019
Updated 23 hours ago
Hudson’s Bay Co. has more than enough to deal with.
HBC is generating consistent losses in its retail operations and retreating from international acquisitions it made a little over half a decade ago. A $29.4-million pay package for chief executive officer Helena Foulkes is not sitting well at all with institutional investors.
To top it off, the 349-year-old company’s shareholders are weighing a take-private bid from executive chairman Richard Baker, at a price that is 44 per cent below the 2012 initial public offering price of $17 a share.
Clearly, HBC had some explaining to do at its annual meeting in Toronto this week. Instead, the retailer decided to bar journalists from the room.
It’s a rare move and it sends a poor message – that in times of turbulence, transparency must be minimized. There wasn’t even a webcast available for shareholders who couldn’t attend.
Such a decision tends to have the opposite of the intended effect, attracting more questions rather than fewer. Mr. Baker may well intend to take HBC private to avoid the madding crowd of public investors but as it stands it is still a public company, beholden to all its shareholders.
Mr. Baker’s career at HBC has been marked by extracting value from far-flung assets – much of it impressive. Now, he wants to make it about a big buy.
The bid, at $9.45 a share, has the support of holders of 57 per cent shares, including his own 5 per cent. But some in the minority are giving the proposal a rough ride and the chorus of opposition is growing. Land & Buildings Investment Management LLC founder Jonathan Litt has been a frequent thorn in Mr. Baker’s side and it’s no different this time. Mr. Litt calls the offer “woefully inadequate,” pointing out Ms. Foulkes herself had previously estimated the worth of the company’s real estate holdings at $28 a share.
The Stamford, Conn.-based investor has called on the special committee of the board examining the $1-billion cash bid to open the process up to a full search for “strategic alternatives,” including a sale.
On Thursday, Vancouver-based Rennie Capital Corp., which describes itself as a significant long-term shareholder, jumped in to call the proposed deal “obviously and incontestably grossly inadequate,” taking the tension up a notch.
It sent its own calculations to the special committee, saying the company’s real estate holdings and Hudson’s Bay and Saks Fifth Avenue banners have a fair-market value of $33 a share. That’s up for debate, of course, and the investor said it had not previously planned on selling its shares.
The tone gets tougher. It would be a “travesty of corporate governance” if the committee does not reject the bid, Matthew Rennie, the firm’s chief financial officer, wrote.
“The take-private proposal serves no one other than Richard Baker and the Baker Group and seeks to severely damage other loyal shareholders like ourselves, shareholders to whom you owe a duty of care.”
Still, despite the broad consensus that the company’s real estate assets are a rich vein of unearthed cash, it’s doubtful any bid would be in the neighbourhood that the angry shareholders suggest is possible.
Ms. Foulkes, a former president at U.S. drugstore giant CVS Health Corp.’s pharmacy division, has made several moves to put HBC back on solid ground. She has jettisoned European operations, agreeing to sell the remainder this month for $1.5-billion. She sold the company’s Lord & Taylor flagship building in Manhattan for $1.1-billion, and has put the rest of the chain up for sale. She is shutting the money-losing stores, including Home Outfitters.
But the retail landscape has been even more ruthless, due in large part to online competition, and the shares had slumped. They fell to as low as $6.37 on June 7 and have since risen above the bid price on the wager that a higher offer is in store.
Despite the corporate restructuring moves, the turnaround is anything but complete. Proxy advisory firm Glass Lewis & Co. gave HBC an F grade for compensation, saying it had been “deficient in linking executive pay to corporate performance.” At the annual meeting, large institutional shareholders, including Ontario Teachers’ Pension Plan Board, British Columbia Investment Management Corp. and California Public Employees Retirement System, either voted against or withheld votes for the company’s executive pay scheme in a non-binding resolution.
The company won the day on that count, but with 26.5 per cent voting against it, minority shareholders are sending a clear message that they aren’t happy, and that HBC remains very much a work in progress. Meanwhile, there are questions about whether Mr. Baker’s $9.45 bid rewards only tho
Aug 2 (Reuters) - A special panel of Hudson's Bay Co reviewing a C$1.74 billion take-private bid for the retailer, proposed by Chairman Richard Baker and a group of shareholders, said the offer was inadequate based on an initial analysis.
The Baker-led consortium, owning 57% of Hudson's Bay, had offered to buy the struggling retailer for C$9.45 per share in June.
Shares have since surged more than 50% and gone past Baker's bid, closing at C$9.79 on Thursday
Activist shareholder Jonathan Litt had lambasted the bid as "woefully inadequate" then, saying the company was worth double what the group was offering.
He had also asked the committee of independent directors reviewing the bid to hire an independent investment bank to evaluate the value of Hudson's Bay's real estate and retail banners.
In July, private equity firm Catalyst Capital Group Inc offered to buy a near C$150 million stake in Hudson's Bay, and said it would oppose Baker's take-private proposal.
The special committee on Friday said it was not in a position to make a recommendation on Catalyst's offer to buy up to 14.85 million shares of Hudson's Bay at C$10.11 per share.
The committee and its financial advisors expect to meet with representatives of various shareholders next week to discuss the buyout proposal and Catalyst Capital's offer. (Reporting by Debroop Roy in Bengaluru; Editing by Shailesh Kuber)
Catalyst "...scored a major win for minority shareholders by prompting a higher bid from a group led by Chairman Richard Baker. Catalyst accumulated shares over the summer, amassing a 17.5% stake to fight for a better price, while appealing to the Ontario Securities Commission for a delay in the shareholder vote.
Based on the sweetened Baker offer of C$11 a share, Catalyst would post a return of 8.8% on the shares it bought in August. Catalyst also snapped up stock sold by the Ontario Teachers’ Pension Plan in June for C$9.45 a piece, resulting in a potential 16% gain."
"Catalyst Capital Group Inc. is making a rival takeover offer for Hudson's Bay Co. The investment firm is offering $11 per share in cash" Let's hope it continues to go up.
$30/ share when real estate is factored in
Watch the earnings that are coming out they might be artificially made to look bad to make the buyout offer that Baker is offering look sweet just don’t forget the Value of the real estate here as I said before he is offering 1.7 billion and the SAKS storeOn fifth Avenue is worth 3 .5 billion alone we need to see $18 at least!
I knew they would have a higher unexpected loss,,, I’m saying it’s artificial and used to make the take-out price look good hold tight this company is worth a lot more than nine dollars and change
So what shall HBC do with the money they got from the Lord and Taylor building??? Answer keep it in the bank to help fund the losses that continue to mount every quarter ,,,shareholder value is being flushed down the blank in time the Crown Jewels Keep getting sold off and the retail operations continue to post losses this company needs to be dissected and sold in pieces sooner than later!
"It ain't over until the fat lady sings."
Hold onto your shares – certainly do not sell below the so called sweetened C$10.30/share offer on the table from Baker and his group. Here is a press announcement from the Catalyst group of shareholders opposing the new deal.
- Agreement between Richard Baker Group and HBC amounts to nothing more than a severely undervalued share buyback at the expense of shareholders
- Catalyst and other shareholders representing approximately 28.24% of the common shares of HBC intend to vote against the agreement, representing a majority of the minority shareholders
- HBC Board and Management have shown that they are hopelessly conflicted
- Catalyst believes that a superior transaction is possible and calls on the Board to explore alternatives that would maximize value
TORONTO, Oct. 31, 2019 /CNW/ - The Catalyst Capital Group Inc., on behalf of investment funds managed by it, ("Catalyst") today announced that it and other shareholders of Hudson's Bay Company (TSX: HBC) ("HBC" or the "Company") representing approximately 28.24% of HBC's total common shares outstanding intend to vote against the recently agreed transaction (the "Insider Issuer Bid") between HBC and Richard A. Baker, Governor and Executive Chairman of HBC, and certain other insiders of the Company (collectively, the "Baker Group").
Gabriel de Alba, Managing Director and Partner of Catalyst, said, "Since the announcement of the Baker Group proposal, we have held a belief that the HBC Board and its Special Committee would ensure that the interests of all shareholders would be the foundation of the process and negotiation with Richard Baker. The agreement that the Company entered into is so fundamentally conflicted, that it shows the amount of leverage Richard Baker has over the Board and Management. It is unconscionable that the Board would use shareholders' funds in a severely undervalued share buyback with massive tax leakage and dress it up as a premium transaction."
Added de Alba, "With shareholders holding approximately 28.24% of the HBC common shares now opposing the Insider Issuer Bid, we call on the Board to either demand that Richard Baker release other members of the Baker Group to consider other options or allow the Baker agreement to expire and run a true sale process. Catalyst is aware of a number of strategic investors that are interested in participating in a process that is open and not constructed to benefit an insider, and we have no doubt that the HBC Board is also aware of these interested parties. Catalyst itself is also prepared to be a participant in the process and work towards an offer to acquire the Company at terms financially superior to the Insider Issuer Bid."
Catalyst exercises control or direction over 32,326,878 common shares of HBC, representing approximately 17.49% of the 184,331,345 issued and outstanding common shares as reported by the Company in its Management's Discussion and Analysis dated September 12, 2019. Catalyst has begun to formally review steps that may be taken in opposition to the Insider Issuer Bid. Such actions include speaking with certain securityholders of the Company and other parties in order to assess support for Catalyst's position and for other reasons, and may include the solicitation of proxies from securityholders of the Company in opposition to the Insider Issuer Bid and regarding related matters and taking steps or pursuing a course of action to maximize value for all shareholders of the Company, including pursuing an alternative transaction to the Insider Issuer Bid. Depending on market conditions and other factors, Catalyst may in the future increase or decrease its control or direction over securities of the Company through open market transactions, private agreements or otherwise.
Don't think anyone buying @ $9.30 today to pick up 15 cents arbitrage in 6 months. Litt is quiet. Something afoot?
No matter what the so called independent committee says, there is no way that 9.45 valuation can be legally defensible in any lawsuit. SAKS NYC valuation was $5 billion USD, when Baker acquired SAKS 6 years ago 6-7 today, that's 8-9 billion CDN.
I heard it could go private for 18$ a share
So there you have it.
Holding 32% of the minority shareholders' stake in HBC, Catalyst now appears to be in cahoots with Mr Baker and C$11 is the best price we can hope to get :(
Unless – and this is still a possibility but unlikely – an independent third party, interested in the company's real estate, the prime asset, comes in with a substantially higher bid for the whole company. A price that Mr Baker's consortium will be willing to accept and walk away.
Let this be a lesson to small-time investors like ourselves. Due diligence as to ownership stakes before you buy in at an inflated price and, nevertheless, hold out for the best deal – and not be persuaded by some loudmouths here who have been trying to persuade us that the company was on its way to bankruptcy..
(Bloomberg) -- Hudson’s Bay Co. Chairman Richard Baker raised his offer to take the struggling retailer private, handing a victory to minority shareholders including Catalyst Capital Group Inc. that fought to derail the original bid.
Hudson’s Bay said in a statement late Friday it agreed to a new bid by Baker and a group of allies, who together control the company. The offer was increased for a second time to C$11 ($8.46) a share from C$10.30. Baker’s first offer was for C$9.45 apiece in June.
The new take-private bid values the owner of Saks Fifth Avenue at about C$2 billion. Catalyst, a Toronto-based private equity firm that had waged a campaign against the agreement and convinced the regulator to delay the vote, agreed to support the new deal.
The raised offer “delivers significantly more value for all minority shareholders, well above the original proposal,” said Gabriel de Alba, managing director and partner of Catalyst, in a separate statement.
This “provides minority shareholders with compelling and immediate value and is supported by our largest minority shareholder,” said David Leith, the chairman of the board’s special committee formed last year to weigh in on the offer.
Catalyst, which owns a 17.5% stake in the retailer, was a substantial hurdle for the controlling shareholders to overcome. The Toronto-based firm’s stake amounts to about 32% of the minority shareholder votes, and its support now all-but-ensures the transaction will go through at a planned February vote.
Baker has said he wants to let the Canadian retailer attempt a turnaround outside the glare of public markets. While it has reduced debt after selling assets in Europe, the company is still struggling to boost sales at its eponymous chain in Canada, the oldest company in North America. Saks has also recently showed signs of weakening. The luxury retailer last month posted its first same-store sales decline in at least eight quarters.
The sweetened offer may further boost shares, which gained more than 20% this week after reports that Baker had approached minority shareholders about potentially raising the offer.
While the C$10.30-a-share offer was approved by the board in October, preliminary tallies showed the Baker group had fallen short of the necessary support from investors to proceed with the transaction, according to people familiar with the matter.
Catalyst, a private equity firm which is run by Newton Glassman, had made its own proposal at C$11 a share that was rejected by a special committee of the board because Baker’s group was adamant it wouldn’t tender its shares.
Well timed offer at the lowest possible share price in its history to make the faint at heart sell. Market makers at work to keep the share price at its lowest, and now at the offer price. Focus on the bad and keep the fear up ploy. Real estate asset value way over current offer. Not a good time to sell. It can't get worse folks. The turnaround is already at work.
Now they are threatening shareholders "if HBC were to remain a public company, given the continued challenging environment for retail stocks, the Continuing Shareholders expect HBC’s stock price would fall meaningfully, potentially to levels comparable to the price it was trading prior to the announcement". Is the intent to intentionally mis-manage the company? How about you turn around the company and invest in the operations without privatizing the company. I'm tired of the nonsense that 'we can't take risks without company being privatized'. What they are saying is "we don't think its worth our effort to improve this company unless we can pocket millions for ourselves"
The realestate of just the Saks store in New York and Beverly Hills is worth more then the market is putting on the entire company in real Buy!
$9.45 just won't fly....opening salvo. Minimum of $18 for me....
As I said earlier they are offering 1.7 billion and the SAKS store on Fifth Avenue alone is worth 3.5 billion this offer needs to be at least $18!
Surprised this news isn't moving the stock up
This snake is going to try to buy this company at a cheap price because it is been depressed for so long but the underlying assets,,, example the Saks fifth Avenue building a city block long and the Beverly Hills saks . This is just two examples of the many properties in this Premier portfolio that wouldn’t surprise me to be worth $30 a share this is just my opinion but it’s very very sad
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