Catalyst Capital Group buys nearly 18.5M HBC shares in tender offer

The Hudson’s Bay Co. insiders who want to take Canada’s oldest retailer private face a new obstacle after an investment firm snapped up about one tenth of the company’s outstanding shares.

The Catalyst Capital Group Inc. announced Monday it acquired nearly 18.5 million of the retailer’s shares — about a 10.05 per cent stake in the company — for $187 million as a result of its tender offer made in late July in an effort to oppose a privatization bid led by HBC chairman Richard Baker.

“We are pleased with the result of our offer to HBC shareholders, which gave participating shareholders an immediate premium to both the market price of HBC shares and to the Baker group’s proposal,” Catalyst managing director Gabriel de Alba said in a statement.

“The 10.05 per cent 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.”

A Catalyst spokesperson declined to disclose how big a stake it now holds in HBC.

The investment firm had offered to buy up to nearly 19.8 million shares for $10.11 per share for a total of $200 million, up from an initial offer of up to 14.8 million shares. The offer expired Friday.

Catalyst’s offer came on the heels of a privatization bid by Baker and other shareholders who own about a 57 per cent stake in HBC. They presented a $9.45-per-share buyout.

A special committee of HBC’s board of directors formed to assess the proposal said in a statement Friday that its initial analysis shows the price of Baker’s offer is “inadequate.”

A spokesperson for Baker declined to comment on the finding or Catalyst’s purchase, but it appears to make the situation more difficult for the Baker-led group.

Baker said in a letter to shareholders at the beginning of the month that Catalyst’s “coercive partial bid … is designed solely to prevent our whole company transaction from occurring.”

The special committee added in a statement Friday that shareholders “should exercise caution” regarding the Catalyst offer as it “is not a true alternative” to Baker’s proposal.

If HBC receives a revised proposal from Baker’s group and they reach an agreement, any transaction would need to be approved by a majority of the company’s minority shareholders, it said.

“If all common shares subject to the amended Catalyst offer are taken up and paid for, Catalyst will control a meaningful portion of the common shares held by the minority shareholders,” it said.

Catalyst has said that it will vote any shares it acquires against the privatization bid. The investment firm said it is committed to working with HBC’s special committee reviewing the takeover offer and the board to seek out every alternative that can maximize value for all shareholders.

Baker’s letter also expressed concern that without a transaction like the one he is proposing “there is a real and significant risk that HBC’s stock price falls” back to where it was previous to the privatization bid announcement.

Still, HBC shares moved up on the day’s news, rising 73 cents or 7.78 per cent to $10.11 — above the $9.45-per-share Baker offer — in early trading on the Toronto Stock Exchange.

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