Catalyst Reacts to Special Committee’s Rejection of Offer to Acquire HBC

Hudson’s Bay Co.’s attempt to go private has led to a relentless battle that pits a group led by chairman Richard Baker against minority stakeholders Catalyst Capital Group Inc.

In its latest move, private investment firm Catalyst reiterated its offer of CA$11.00 ($8.29) per share in cash for all common shares of the Canadian retailer and commented on the recent statements made by Baker’s coalition of investors and the board’s special committee.

A statement shared by Catalyst last night said that the special committee, which rejected Catalyst’s proposal in a late Monday release, received “financing support letters from leading U.S. and international financial institutions” and did not question Catalyst’s ability to finance an all-cash deal for HBC, as Baker’s group argued  in a letter sent to the special committee on Monday.

“The special committee did not argue the superiority of the Catalyst offer, nor did it address the many issues that Catalyst has raised in regard to the process leading up to the insider issuer bid [or Baker’s share buyback offer],” the firm said. “It only notes that the Baker Group is blocking any ability of the board to maximize value for all shareholders.”

The statement contested Baker’s suggestion that Catalyst’s offer, which values HBC at CA$2.03 billion ($1.53 billion), was “not capable of being financed.” In its letter to the committee dated Dec. 2, Baker, along with investors including Rhône Capital LLC and WeWork Property Advisors, said that Catalyst’s proposal “is not realistic in its assumptions regarding sources of cash” and “would swiftly add the company to the long list of retailers that have been forced to close their doors, shed jobs and impact pensioners.”

Catalyst added in yesterday’s statement that it had filed a notice of application for a hearing with the Ontario Securities Commission seeking redress for inadequate and inaccurate disclosure as well as “coercive and unfair practices leading up to and following the HBC board approval of the insider issuer bid,” originally made on Oct. 20 when Baker’s group agreed to pay CA$10.30 ($7.86) per share in cash for the remaining shares it doesn’t already own. Right now, the Baker group collectively holds 57% of the company’s common shares, while Catalyst owns 17.5%.

The Baker group has also issued a complaint to the OSC about Catalyst’s purported “misleading disclosure regarding, among other things, the adequacy of their publicly stated financing arrangements” and ” ‘blocking position’ in respect of our transaction.” Its letter on Monday urged the special committee to make one of two choices: either accept the Baker group’s all-cash offer or remain investors in HBC as a public company.

The OSC will hold a hearing on Thursday to consider Catalyst’s application that seeks to block or postpone the Baker coalition from taking over HBC; Catalyst also seeks to move forward an upcoming Dec. 17 vote by at least three weeks. Catalyst already filed a separate complaint with the OSC last week, accusing the Baker group of submitting “a coercive offer through a non-arm’s length process that sought to preclude alternative bidders.”

FN is awaiting comment from HBC.

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