Catalyst Capital Group Inc. has launched a bid for shares in Hudson’s Bay Co. as it escalates its opposition to a contentious $1-billion privatization offer from the department store chain’s executive chairman.
Catalyst, led by Toronto financier Newton Glassman, plans to offer $10.11 a share in an effort to increase its holdings of shares not controlled by a group led by Richard Baker, HBC’s chairman. Catalyst will offer up to $150-million for as many as 14.8 million shares, it said in a statement.
In June, Catalyst bought part of the 10-per-cent stake in HBC sold by the Ontario Teachers’ Pension Plan. Even with the offer launched on Monday, Catalyst would fall short of the threshold needed to block the deal, which requires the approval of the majority of shares not controlled by the Baker group.
Mr. Baker announced in June he was leading a consortium offering $9.45 a share to take the company private. HBC is best known for its namesake department stores across Canada and the Saks Fifth Avenue banner in the United States. As the retail environment has weakened in the face of online competition, it has been restructuring its operations by selling properties and closing unprofitable stores in Europe and North America.
Mr. Baker has said he has the support of 57 per cent of HBC shareholders, including such investors as Rhone Capital LLC and office-sharing company WeWork Property Advisors. However, the deal needs the support of the majority of other shareholders in order to succeed. A special committee of HBC’s board is evaluating Mr. Baker’s offer along with financial and legal advisers. A takeover circular has yet to be filed.
HBC stock closed at $9.90 on the Toronto Stock Exchange on Monday, as investors wagered a higher bid could be in the offing. Catalyst announced its proposal after the market closed.
Catalyst’s bid adds a new twist to a battle for control of Canada’s oldest corporation. Garnering a large stake in HBC could allow it to push for an examination of how the Baker group developed the proposal.
“The controlling Insiders are only using shareholder capital and assets to buy out the company’s minority owners at a price which Catalyst believes is not at all reflective of fair value,” Catalyst said.
Catalyst is among investors that have called the privatization offer too low, saying HBC’s real estate holdings push the value of the company to at least $28 a share. However, to realize that, the assets must be sold and that raises questions about the remaining retail operations. Other activist investors that have opposed Mr. Baker’s proposal include Land & Buildings Investment Management LLC and Sandpiper Group. Officials from the funds, as well as from HBC, were not immediately available for comment.
Catalyst has had a rocky couple of years, amid difficulties it has had realizing value for investments within timelines it has set. Meanwhile, Mr. Glassman underwent back surgery in late 2018 and has yet to return to his full-time duties as chief executive of Callidus Capital Inc., the loss-making alternative lending company that is majority-owned by Catalyst.
However, Catalyst partner Gabriel de Alba, who is in charge of the HBC investment, oversaw the restructuring of European real estate company Geneba Properties NV, which owned warehouses and light industrial buildings in Germany and the Netherlands. Catalyst invested $101-million in Geneba in 2012 and made a 19.5-per-cent annualized return when it sold the company in 2017.
Catalyst said its offer is open until Aug. 16 unless it withdraws or changes it.
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Jeffrey Jones