Investment firm buys $141M in HBC shares to block take-private sale

Dive Brief:

Canadian private equity firm Catalyst Capital Group on Monday announced the purchase of 18,491,502 shares of Hudson's Bay Company (about 10.05% of HBC's total shares outstanding) for some 187 million Canadian dollars ($140.77 million as of the exchange rate at press time). The purchase will be completed within three business days, according to a company press release.
That reflects a per-share purchase price of C$10.11 in cash, a premium well above the C$9.45 per share offered by a take-private group led by HBC Gov. Richard Baker and above Friday's closing market share price in Toronto of C$7.03.
That group, which collectively owns about 57% of outstanding shares and also includes private equity firms Rhône Capital L.L.C., Hanover Investments (Luxembourg) S.A. and Abrams Capital Management, L.P.; as well as coworking startup WeWork Property Advisors, June 10 submitted their proposal to take the department store company private.

Dive Insight:

Financial firms with stakes in HBC aren't taking kindly to Baker's take-private proposal.

Catalyst in its release urged that the Special Committee "reject any effort by the controlling shareholders of the Company" and characterized the Baker group proposal as an attempt "to disenfranchise the Company's minority owners." The firm also said it supports the ongoing process at a special HBC board committee that is looking into Baker's offer.

"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," according to the firm's press release.

Investment firm Land & Buildings has employed much stronger language and appears to be emboldened by the special committee's determination in early August of the Baker offer as "inadequate." That firm earlier this month called for Baker to step down from his role, after publishing a letter to Hudson's Bay's special committee in June calling his group's offer "woefully inadequate."

Land & Buildings in its August open letter said that Baker's "approach has decisively demonstrated that he is unqualified and far too conflicted to continue as Governor of the Board of Directors, and for that matter, to continue as a director of HBC at all."

Baker's professional career began in real estate investment and development, and he has employed real estate-focused lens in his dealings at HBC. Hudson's Bay Co. was in the black in its most recent quarter thanks only to the C$817 million it garnered from its sale of the Lord & Taylor New York City flagship to WeWork, so it's little wonder the company remains focused on monetizing its real estate. In addition to selling that building, the company has sold off its Gilt flash sales unit and the remaining interest in its German real estate joint venture and other interest in its European retail joint venture to partner, SIGNA, for $1.5 billion, marking its exit from Germany.