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Fight for HBC Close to a Conclusion—Here’s What’s Next

Hudson’s Bay Co.’s minority shareholders pushed back to get themselves a better deal—and won.

The newly amended agreement for the group led by HBC chairman Richard Baker to take the retailing company private offers 11.00 Canadian dollars ($8.48) per share, up from the original June offer of 9.45 Canadian dollars ($7.12). The change gives the minority shareholders a 16.4 percent increase in cash per share in local currency.

The deal is now valued at nearly 2.03 billion Canadian dollars ($1.56 billion), up from the original proposal of 1.74 billion Canadian dollars ($1.31 billion) last June.

Getting to the new valuation wasn’t easy.

Minority shareholders were expected to battle for a more lucrative deal, but lead minority activist shareholder Catalyst Capital Group Inc. secured the upper hand when the two proxy advisory firms split over their recommendations. Institutional Shareholder Services recommended shareholders vote against the plan, while Glass Lewis urged the minority contingent to support the Baker-led consortium’s proposal.

With a per-share offer agreement in hand, Catalyst will vote in favor of the take-private transaction when HBC holds a special shareholders meeting next month.

“We are pleased to have reached agreement with the continuing shareholders for a privatization transaction at a substantially increased price, which provides minority shareholders with compelling and immediate value and is supported by our largest minority shareholder,” David Leith, chair of the Special Committee of the HBC Board of Directors, said.

“I would like to commend Catalyst on their constructive approach to getting a transaction agreed which we believe is in the best interests of the company and the minority shareholders,” Leith added.

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“Our all-cash proposal would provide HBC’s public shareholders the ability to realize immediate and certain value for their shares at a substantial premium while transferring the risks and uncertainties facing HBC to the continuing shareholders,” Baker said at the time he made the initial offer.

In addition to Baker, the continuing shareholders, which own a 57 percent stake, include Rhône Capital LLC, WeWork Property Advisors, Hanover Investments (Luxembourg) S.A. and Abrams Capital Management.

HBC operates the Hudson’s Bay, Saks Fifth Avenue and Saks Off Fifth nameplates. Late last year, the Ontario-based retail company sold its Lord & Taylor business to LeTote for $100 million.

Upon closing of the privatization transaction, the common shares of HBC will be delisted on the Toronto Stock Exchange, and the company will no longer be subject to certain public reporting requirements under Canadian securities laws.