Richard Baker, executive chairman and governor of the Hudson’s Bay Co., might have to up his offer to take the company private.

Baker and a group of shareholders on June 10 offered 9.45 Canadian dollars per common share to take HBC private, in a bid valued at 1.7 billion Canadian dollars, or $1.28 billion, for 100 percent of the company.

But on Friday, the special committee of HBC’s board evaluating the offer stated that $9.45 per share is “inadequate,” based on its initial analysis. However, the special committee’s analysis is ongoing, involves outside financial and real estate advisers, and the valuation of the company’s shares is expected to be completed in September.

Baker’s shareholder group already owns 57 percent of the outstanding common shares of HBC. The group includes Rhône Capital LLC, WeWork Property Advisors, Hanover Investments (Luxembourg) SA and Abrams Capital Management LP.

Also in its statement Friday, the special committee warned shareholders to be cautious in their response to the July 22 unsolicited offer from Catalyst Capital Group to acquire up to 14.8 million common shares of HBC at $10.11 per share in cash. The stock was trading at just over $9.80 on Friday morning.

Catalyst’s bid represents 15 percent of HBC’s outstanding common shares not owned by the shareholder group, and is designed to block the sale of the company to Baker and his group. Baker’s group needs a majority of the shares not represented by his group for their offer to go through.

Because the special committee is continuing to analyze Baker’s bid, it said it is not in a position to make a recommendation on Catalyst’s offer. “In view of the foregoing, however, the special committee advises shareholders to exercise caution regarding a decision to tender to the Catalyst offer,” the committee said.

Catalyst’s offer expires Aug. 16, prior to the anticipated completion of the special committee’s analysis of Baker’s bid.

Next week could be crucial in determining the fate of the different bids being presented to shareholders. The special committee and its financial advisers plan to meet with representatives of various shareholders to hear their perspectives on both offers. Advisors include TD Securities Inc., J.P. Morgan Securities, Centerview Partners LLC, and Blake, Cassels & Graydon LLP and others.

The committee said the Catalyst offer is “not a true alternative” to the shareholder group proposal, and explained it would not provide shareholders with the kind of protections required under securities laws in a formal takeover bid, which Catalyst’s offer isn’t.

For example, the committee said Catalyst’s offer does not provide shareholders with the right to withdraw shares tendered in certain circumstances at any time within 10 days after a variation in the terms of the offer, or in the event that Catalyst has not paid for shares within three business days after taking them up under the offer.

The committee also pointed out that Catalyst would not be required to make adequate arrangements before making its offer to ensure that funds are available to fully pay for the common shares Catalyst has offered to acquire.

On Thursday, Baker sent a letter to the special committee, urging that his privatization offer be accepted because the company’s strategic plan requires “significant capital investment” to weather “difficult challenges in the current macro environment which pose serious threats to both our operating business and our related real estate assets.”

“We believe that the business plan and value creation initiatives required to address these challenges will be better understood, accepted and executed by patient capital in a private company context,” Baker wrote.

“We are already large and long-term shareholders of HBC and are prepared to transfer the long-term risks and uncertainties inherent in pursuing the company’s strategic plan from HBC shareholders to the continuing shareholders via our whole company cash premium proposal. Our proposal provides an opportunity for all minority shareholders to realize the sale of 100 percent of their shares in a fair process and at a premium cash price, with the benefit of full disclosure and an informed board recommendation following a careful and thorough review.”

Baker criticized Catalyst’s bid as “coercive” and “designed solely to prevent our whole company transaction from occurring, and thereby deprive minority shareholders of the ability to receive a substantial cash premium for their full investment in HBC.”

Baker has been streamlining HBC operations, and this year has Lord & Taylor up for sale and decided to shutter Home Outfitters in Canada and close up to 20 Saks Off 5th stores in the U.S. The company is performing “a fleet review” of the 133 Saks Off 5th chain.

HBC last year sold off Gilt Groupe to Rue La La and sold off a majority interest in its European retail operations to Signa Holdings, which owns the Karstadt department store chain in Germany, and a 50 percent stake in its European real estate. The sale to Signa led to a merger of the Kaufhof and Karstadt department store chains in Germany.

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