Richard Baker’s bid to take the Hudson’s Bay Co. private got another lift Wednesday when Glass Lewis, a leading investor advisory firm, recommended that HBC shareholders vote for the transaction.
The Egon Jones ratings firm on Tuesday also gave a thumbs-up encouraging shareholders to vote in favor of the transaction.
Last week, Institutional Shareholder Services, another influential advisory firm, gave a thumbs-down on the bid, characterizing it as unfair.
HBC’s executive chairman Richard Baker, leading a group of like-minded major shareholders representing a combined 57 percent of the shares, has offered 10.30 Canadian dollars per share to buy the remaining 43 percent of the business. A shareholders meeting to count the shareholders’ votes is scheduled for Tuesday.
Some minority shareholders, including the Catalyst Capital Group private equity investment firm, which has proposed $11 a share for the entire company, oppose the plan. It’s unlikely that Catalyst’s offer is accepted by shareholders since Baker and his group, with its majority stake, have no interest in selling the company.
The Baker group, considered the continuing shareholders, only wants to buy the minority shares to take the company private, or let HBC continue as a public company. Aside from the continuing shareholders and Catalyst bids, there are no other offers on the table.
Glass Lewis suggested shareholders take Baker’s offer because despite HBC’s recent asset sales and closures, “the shares have not been immune to the broader industry decline” and “a take-private transaction that offers a meaningful market premium could present an attractive alternative to HBC shareholders.”
Glass Lewis also said the special committee of HBC’s board gave “due consideration” to potential alternatives for shareholders including distributing some proceeds from HBC’s asset sales in Germany via a share repurchase or a special dividend, or redeveloping some real estate. Glass Lewis said a share repurchase or special dividend would likely yield less value than the proposed privatization bid and that redeveloping real estate requires “substantial investments” and entails “significant execution risk.”
Responding to the Glass Lewis report, Catalyst claimed that “Glass Lewis ignored all of the issues related to the creation of the Baker group and buys into the threat that the take under proposed by that group is the only option.”
Catalyst also said it’s prepared to seek board change “to ensure that the interests of minority shareholders are protected.”
Egon-Jones said Baker’s bid offers “compelling value” for minority shareholders and cited extensive negotiations between the group, the special committee and advisers to devise the bid.
In June, Baker and his group offered $9.45 Canadian per common share and later raised the offer to $10.30. The stock is currently trading at $8.74.