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Hudson’s Bay Group Said to Consider Shelving Takeover Offer

After regulators delayed the vote on Hudson’s Bay buyout, Richard Baker and his investors’ group might terminate the deal.

(Bloomberg)—Hudson’s Bay Co. Chairman Richard Baker may scrap an offer to take the struggling retailer private after regulators delayed a vote on the deal following complaints from a minority shareholder.

The investor group that controls the owner of Saks Fifth Avenue is “evaluating next steps, including terminating the transaction,” according to a memo sent to advisers. The group plans to make a final decision in a week or so, according to the note. Until then, it’s “pens down” until further notice, meaning no work is to be done on the deal.

The Baker group cited third-quarter results and a delay in the shareholder vote ordered by the Ontario Securities Commission late Friday. The Canadian regulator endorsed a complaint by minority shareholder Catalyst Capital Group Inc., which had sought a delay and increased disclosure on the Baker bid. The vote had been scheduled for Dec. 17 on the C$10.30-a-share offer that valued the Toronto-based company at C$1.9 billion ($1.45 billion). Hudson’s Bay said Monday it will schedule a new date “as soon as practicable.”

The decision to consider scrapping the offer comes after preliminary tallies showed the Baker group had fallen short of the necessary support from investors to proceed with the transaction, according to people familiar with the matter. The bid required the backing of a majority of the minority shareholders. The Baker group declined to comment.

“They, collectively, may come back with another offer to try to take the company private -- Are they done? I don’t think so,” Bloomberg Intelligence analyst Poonam Goyal said of the group. “They just have to come up with a better price that makes sense for shareholders, too.”

Retail Focus

The pulled deal would return the focus back on the retailer’s attempts to turn its business around and find a profitable mix between online and brick-and-mortar shopping. While it has reduced debt after selling assets in Europe, Hudson’s Bay is still struggling to boost sales at its eponymous chain in Canada, the oldest company in North America, while Saks recently showed signs of weakening. The luxury retailer this month posted its first same-store sales decline in at least eight quarters.

Hudson’s Bay shares, which have traded well below the Baker offer in recent weeks, fell as much as 2.6% on Monday to C$8.58. Still, they are well above the C$6.37 level prior to Baker’s initial offer in June. The current share price indicates investors may be expecting a sweetened bid from the Baker group, which controls 57% of the company.

“What that price is, I don’t know because now they have just the Bay and they have Saks,” after selling several assets, Goyal said.

Catalyst, the Toronto-based private equity firm run by Newton Glassman, had made its own proposal at C$11 a share that was rejected by a special committee of the board because Baker’s group was adamant it wouldn’t tender its shares. The Baker group dismissed the Catalyst bid as “illusory,” saying its “reckless” financing plan would add to the company’s debt.

Gabriel de Alba, managing director of Catalyst, on Monday accused Baker’s group of “disregard of minority shareholders” and called on the chairman and his backers to start “a good-faith value maximization process,” according to a statement.

If board members don’t engage with Catalyst, the group “is prepared to take additional steps to address the improper conduct of HBC and certain of its insiders,” de Alba said.

The vote on Baker’s proposal was bound to be an uphill battle for Hudson’s Bay, as Catalyst alone held almost a third of the 100 million shares to be counted in the vote. An added hurdle was herding shareholders, as seldom do all of them participate in such votes.

Complicating the matter, advisory firms had come out on different sides, as Institutional Shareholder Services Inc. urged investors to vote against the offer while Glass Lewis & Co. backed it.

To contact the reporters on this story: Scott Deveau in New York at [email protected];

Sandrine Rastello in Montreal at [email protected].

To contact the editors responsible for this story: David Scanlan at [email protected]

Kevin Miller, Lisa Wolfson

© 2019 Bloomberg L.P.

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