Richard Baker’s proposal to take the Hudson’s Bay Co. private has suffered a setback with the disclosure that The Catalyst Capital Group Inc. has just upped its stake in HBC by purchasing 10.05 percent of HBC’s outstanding shares.
Catalyst, a Canadian private equity investment firm investing in distressed and undervalued companies, said Monday it purchased 18,491,502 shares of HBC at 10.11 Canadian dollars per share in cash. The total cost was approximately 187 million Canadian dollars. Catalyst said it will complete the purchase of the shares within three business days.
Catalyst’s purchase triggered a 9 percent jump in HBC stock to 10.22 Canadian dollars on Monday morning.
According to Gabriel de Alba, managing director and partner of the Toronto-based Catalyst, the deal gives participating shareholders “an immediate premium to both the market price of HBC shares and to the Baker group’s proposal.”
On June 10, HBC’s governor and executive chairman Richard Baker along with a group of major shareholders representing a combined 57 percent of the voting shares, made a bid to take HBC private. Under the bid, the group would acquire all the minority shareholders’ common shares for 9.45 Canadian dollars for each share, for a total cost of around 1.7 billion Canadian dollars, or $1.28 billion. The group includes Rhône Capital LLC, WeWork Property Advisors, Hanover Investments (Luxembourg) SA and Abrams Capital Management LP.
But Catalyst has opposed Baker’s offer and its latest purchase of shares makes it very difficult for Baker’s bid to succeed since it would need to acquire a majority of the shares not represented by his group — over 21.5 percent — to go through.
Catalyst now has well over 10.05 percent of HBC shares. Under regulatory rules, Catalyst is not required to disclose its exact stake in HBC until sometime in September.
“The 10.05 percent of HBC shares adds to our existing holdings and we look forward to working with HBC, the special committee of the board and the company’s stakeholders to ensure that this iconic company and its substantial assets are positioned to unlock value and that any transaction or strategic alternative maximizes value for the benefit of all shareholders,” de Alba said.
He said Baker’s offer “disenfranchises” the company’s minority owners.
“Catalyst is committed to working with the special committee and the HBC board to seek out every alternative that can maximize value for all shareholders, whether through a sale process, dividend distributions of the cash to be realized from the sale of the company’s key European assets or otherwise.”
Last week, the special committee of the HBC board advised shareholders to exercise caution regarding a decision to tender shares to Catalyst, noting that it won’t be done with its assessment of the value of HBC shares until September. Catalyst had first made its offer in July 22 to buy a smaller number of outstanding shares, about 8 percent, but at the same price.
The committee has also said Baker’s privatization bid wasn’t high enough, and that it has asked Baker and his shareholder to inform the committee of any plan to revise the offer.
On Monday, the special committee had no comment on Catalyst’s latest acquisition of HBC shares.