Canadian private equity firm Catalyst Capital Group Inc. has jumped into the battle for a say on the future of Hudson’s Bay Co.
The investment firm’s offer follows the insider buyout bid led by HBC’s chairman Richard Baker last month.
Catalyst specializes in distressed situations. The Canadian investment firm is pitching a cash offer of 10.11 Canadian dollars ($7.70) per share for up to 14.84 million shares, or a deal value totaling 150 million Canadian dollars, or $114.3 million. All conversions to dollars are at current exchange. The Catalyst offer is just for a portion of the total shares outstanding of HBC.
In contrast, Baker’s per share offer of 9.45 Canadian dollars ($7.12) that was detailed on June 10 has a total deal value of 1.74 billion Canadian dollars ($1.31 billion), which represents a purchase of all shares to take the company private.
Catalyst said it believes the insider buyout offer, led by Baker and other controlling shareholders, “is not reflective of the fair value of the company’s common shares,” and noted that it “greatly undervalues the company across each of its real estate, retail and iconic brand attributes.” The private equity firm also pointed out that the offer from the Baker-led group only uses the insiders’ own shareholder capital and assets to buy out the minority owners.
HBC’s Special Committee on Thursday said of its review of the Baker-led offer to take the company private, “Consistent with its obligation to act in the best interest of the company and all of its shareholders, and in consultation with its independent financial and legal advisors, the Special Committee is evaluating this proposal along with other strategic alternatives.” The Special Committee also disclosed that, as part of its evaluation process, it has “invited a number of shareholders to share their views regarding the privatization proposal directly with the Special Committee and its financial advisors in the coming weeks.
While there was no indication of what “in the coming weeks” meant in terms of timeframe for the overall evaluation or how many shareholders they plan to meet with, the Special Committee and its financial advisors may need to move the process along faster than they might like, as the Catalyst offer is set to expire on Friday, Aug. 16, at 5:00 p.m. (EDT), unless the private equity firm extends or withdraws its offer.
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If HBC and the Special Committee elect to proceed with the offer from the Baker-led group, Catalyst said it would vote the common shares it controls, or has direction over, against the transaction at any shareholder meeting for approval of the deal. It wasn’t immediately clear how many shares of HBC stock that Catalyst has under its control.
HBC’s strength really lies in its Saks Fifth Avenue business and its Hudson’s Bay locations in Canada. HBC is still weighing options for its Lord & Taylor nameplate, which could include a sale of the business. In January, HBC shuttered the Lord & Taylor flagship on Fifth Avenue in New York City.