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Activist Investor Won’t Quit in Fight Over Hudson’s Bay’s Fate

Activist investor The Catalyst Capital Group Inc. refuses to give up the fight for control over Hudson’s Bay Co.’s future.

Catalyst filed a notice for a hearing before the Ontario Securities Commission in connection with the take-private agreement inked between HBC and the investor group, Rupert Acquisition, led by Hudson’s Bay chairman Richard Baker.

Catalyst‘s position argues that the Baker-led group’s offer represents insufficient value for its minority shareholders, which is why it submitted its own competing bid that was essentially rejected Monday by the Special Committee of the HBC board of directors.

The committee deemed Catalyst’s unsolicited proposal as “not reasonably capable of being consummated” and not “a superior proposal” to the one HBC entered into with Rupert Acquisition on Oct. 20, 2019.

Under the terms of the agreement, Baker’s group would acquire HBC for 1.90 billion Canadian dollars ($1.45 billion), or a per-share valuation at 10.30 Canadian dollars ($7.86). The accepted offer is higher than the original proposal in June that was valued at 1.74 billion Canadian dollars ($1.31 billion), or a per-share offer at 9.45 Canadian dollars ($7.12).

Baker’s group, which bills themselves as the “continuing shareholders,” told the committee in a letter Monday that they are not interested in any transaction that would result in the sale of their interests in HBC. Collectively, they hold a 57 percent stake in HBC’s common shares.

The Catalyst offer is “not capable of being financed,” the group said in the publicly disclosed letter, pointing out that the proposal contemplates an unrealistic level of leverage that is “much higher than [HBC], or any department store retailer, can achieve or bear.”

“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 group said in the letter. The proposal, continuing shareholders concluded, appears to be “90 percent debt financed.”

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The Special Committee continues to recommend that minority shareholders vote for the resolution to approve the take-private proposal HBC entered into with Rupert Acquisition when shareholders meet on Dec. 17, 2019.

Whether that meeting can proceed will depend on how the Ontario Securities Commission responds. In its notice, Catalyst requested that Baker’s group be barred from acquiring the shares of minority investors that it doesn’t yet own as contemplated in the acquisition agreement.

Catalyst is also asking, in the alternative, that HBC amend and resend to shareholders certain materials that it alleges contain misrepresentations, and that the shareholder vote slated for Dec. 17 be postponed to a date no earlier than 21 calendar days after the new materials are sent to shareholders.