HBC minority shareholder files lawsuit to block privatization bid

The bid to take Canada’s oldest retailer private faces another obstacle as a minority shareholder seeks to block the proposal, led by Hudson Bay Co.’s executive chairman Richard Baker, in court.

The group behind the $10.30 per share bid is “seeking to take HBC private at a steep discount, depriving minority shareholders … of fair value for their shares,” according to a lawsuit filed by Pangaea Ventures L.P. and Ortelius Advisors L.P. at the Ontario Superior Court of Justice Friday.

New York-based Ortelius is an investment manager that controls all decisions related to the buying and selling of Pangaea’s securities, including its 876,450 of HBC’s common shares that account for 0.476 per cent of the company’s outstanding common shares.

“The defendants have deliberately engaged in actions that have prevented a fair expression of HBC’s market price through the deliberate timing of disclosures, misleading information and a structured bid that permits no competition,” the document reads.

HBC, Baker and Rupert Acquisition Ltd. — which represents the shareholders behind the privatization bid — are listed as defendants.

None of the claims have been proved in court. Representatives for Baker did not immediately respond to a request for comment. HBC deferred comment to representatives for its special committee of the board, which was formed to review the privatization proposal. They did not immediately respond.

The suit calls for “an order permanently prohibiting” the Baker-led group’s privatization proposal from going forward and an amendment to the company’s information circular, which it alleges is misleading.

HBC and the shareholder group, which controls about 57 per cent of HBC’s common shares on an as-converted basis, reached an agreement in October for the company to be taken private after the group upped its offer from $9.45 per share to $10.30.

Since then, the company has been vocal about reminding its minority shareholders to vote for the proposal at an upcoming Dec. 17 meeting. For the deal to succeed, a majority of minority shareholders — not including those behind the deal — must vote in favour.

A spokesperson for the plaintiffs declined to confirm how Ortelius plans to vote. But the lawsuit alleges shareholders are being “forced to sell their shares at a steep discount.”

It claims Baker led a “secret and oppressive” campaign to privatize HBC and as of 2017, “had his eye on his own advantage.”

Baker, who ought to have recused himself from his role when he first advised HBC’s board of his intention in the spring of 2017, structured transactions to advantage his plan, it claims.

He, for example, timed announcements to cap the price of the company’s shares, documents read. When HBC announced in June it sold the balance of its European joint venture assets for $1.5 billion, the company’s stock ought to have at least doubled, according to the suit.

“Baker deliberately prevented news of this monumental transaction from being absorbed by the market,” it reads, by announcing his initial $9.45 per share privatization bid shortly afterwards.

“This announcement effectively put a ceiling on the value of HBC shares.”

The company also issued an information circular “purposely designed to convey a pessimistic view of the company,” according to the suit, which contradicts the optimistic view HBC expressed prior to Baker’s bid. It also allegedly undervalues HBC, including its most valuable asset, the flagship Saks Fifth Avenue location in New York City by at least $2 billion.

That view intends to justify the offer price per share and dissuade competing bids, it reads.

Baker also put structures in place to ensure that any privatization-bid oversight “would be handcuffed in terms of attracting any competing proposals,” the lawsuit claims.

In late November, Catalyst Capital Group Inc. made an unsolicited competing offer of $11 per share. HBC’s special committee rejected it in early December after the Baker-led group said it was “not interested in any transaction that would result in a sale of their interests in HBC,” according to an HBC press release.

The lawsuit alleges the Catalyst offer “is clearly superior” at 70 cents higher, but the special committee confirmed it can not view any other bid as superior as the Baker-led group refuses to sell its shares.

“There is no mechanism for the minority shareholders to receive fair market value for their shares because there is no mechanism for anything approaching a fair, free, open and transparent competitive market for the common shares.”

The matter is also before the Ontario Securities Commission after Catalyst, which controls about 17.49 per cent of HBC’s common shares, requested a hearing to block the bid. The OSC hearing is scheduled to begin on Dec. 11.

Catalyst wants the OSC to block the privatization bid or, at least, require HBC to amend its information circular.

The Baker-led group has said in a letter to HBC’s special committee that has been made public that it filed a complaint to the OSC, but the OSC could not confirm that due to policies intended to protect the integrity of investigations.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Health Minister Tyler Shandro and Dr. Deena Hinshaw, the chief medical officer of health, receive flu shot. Photo via Government of Alberta
COVID cases climb in central zone, Red Deer

The total number of active COVID-19 cases in the province reached 3,138… Continue reading

Many rural municipalities were concerned about a proposed reduction to their industrial revenues, but Alberta’s municipal affairs minister has come up with an alternative solution. (Photo contributed)
Energy industry support won’t injure municipalities

Creating new wells or pipelines would result in a three year ‘tax holiday’

Conservative Leader Erin O’Toole and Premier Jason Kenney participated in a livestream on Oct. 17, 2020. (File photo by THE CANADIAN PRESS)
UCP members pass resolution at AGM calling for privately funded health care option

EDMONTON — Members of Alberta’s governing United Conservative Party have narrowly endorsed… Continue reading

“We weren’t sure what to expect with just doing the 50/50. We have been positively surprised with sales so far,” says Craig Fleming, co-chair of the Red Deer Kinsmen Club’s raffle. (Photo by SUSAN ZIELINSKI/Advocate staff)
Non-profits put their money on 50/50 draws

COVID impacts fundraising events

Student taking a math test. (Pixabay photo)
David Marsden: Students need more testing, not less

Testing has been central to Alberta’s response to the COVID-19 pandemic. It’s… Continue reading

Gillian Robertson celebrates her win over Sarah Frota during UFC 240, in Edmonton, Saturday, July 27, 2019. Robertson used her superior grappling skills to dominate Brazil's Poliano Botelho en route to a unanimous decision win Saturday night on a UFC Fight Night card. THE CANADIAN PRESS/Jason Franson
Canadian Gillian (The Savage) Robertson dominates in UFC decision win in Abu Dhabi

Canadian Gillian (The Savage) Robertson dominates in UFC decision win in Abu Dhabi

Forge FC head coach Bobby Smyrniotis, right, hugs captain Kyle Bekker following their victory in the Canadian Premier League soccer final against Cavalry FC in Calgary, Saturday, Nov. 2, 2019. A month after winning the Island Games in Charlottetown, Hamilton-based Forge FC is back on the move. THE CANADIAN PRESS/Jeff McIntosh
CPL champion Forge FC off to El Salvador for CONCACAF League preliminary-round match

CPL champion Forge FC off to El Salvador for CONCACAF League preliminary-round match

Course workers prepare the landing area at the ski jump venue in Whistler Olympic Park in Whistler, B.C. Friday, Feb. 5, 2010. THE CANADIAN PRESS/Jonathan Hayward
Next generation of Canadian ski talent sets sights on Whistler, B.C., in 2023

Next generation of Canadian ski talent sets sights on Whistler, B.C., in 2023

Mighty Heart is held by groom Siobhan Brown in his stall at trainer Josie Carroll's stable at Woodbine Racetrack, in Toronto, Thursday, Oct. 15, 2020. The one eyed horse, will run in the $400,000 Breeders' Stakes on October 24, attempting to become Canada's first horse to win the Triple Crown since Wando in 2003. THE CANADIAN PRESS/Chris Young
Rain could present big challenge in Mighty Heart’s quest to capture Triple Crown

Rain could present big challenge in Mighty Heart’s quest to capture Triple Crown

Veteran sniper Evgenii Dadonov excited to join Senators: ‘It’s a perfect fit’

Veteran sniper Evgenii Dadonov excited to join Senators: ‘It’s a perfect fit’

Tampa Bay Buccaneers running back Ronald Jones II (27) gets pushed out of bund by Green Bay Packers free safety Darnell Savage (26) during the second half of an NFL football game Sunday, Oct. 18, 2020, in Tampa, Fla. (AP Photo/Mark LoMoglio)
Packers seek to bounce back after embarrassing defeat

Packers seek to bounce back after embarrassing defeat

World junior hockey championship opens on Christmas Day for first time since 2005

World junior hockey championship opens on Christmas Day for first time since 2005

Most Read