TORONTO,The Catalyst Capital Group Inc., on behalf of investment funds managed by it, (“Catalyst“) today announced that it has offered to acquire all of the issued and outstanding shares of Hudson’s Bay Company (TSX: HBC) (“HBC” or the “Company“) for cash consideration of $11.00 per common share (a “Common Share“).
Catalyst currently exercises control or direction over 32,236,878 Common Shares, representing approximately 17.48% of the issued and outstanding Common Shares. Catalyst is the third largest individual holder and the largest minority holder of equity securities of HBC.
Catalyst is deeply concerned with the financial terms and structure of the Company-sponsored share buyback (the “Insider Issuer Bid“) outlined in the October 20, 2019 arrangement agreement (the “Baker Group Agreement“) between insiders led by Mr. Richard Baker (the “Baker Group“) and the Company. The Insider Issuer Bid only uses assets of the Company which belong to all shareholders. Catalyst believes the Insider Issuer Bid is inadequate and undervalues the Company on multiple metrics. The Insider Issuer Bid also has substantial negative tax consequences to a significant number of shareholders.
As a consequence, Catalyst is offering HBC shareholders a superior, independently financed, all-cash transaction that can be completed in a timely manner, subject to a short period to complete customary due diligence. Catalyst is prepared to consider making a higher offer based on the results of its due diligence and the cooperation of the Special Committee, and is also prepared to allow other shareholders to be co-equity sponsors to join its offer. Catalyst expects that its offer could be voted on by shareholders and closed by February 2020. The letter to the HBC Board outlining the superior offer is appended below (Appendix A). Catalyst urges the HBC Board and the Special Committee to act in the best interest of all shareholders and fairly evaluate Catalyst’s superior offer.
Gabriel de Alba, Managing Director and Partner of Catalyst, said, “We are pleased to offer all HBC shareholders a superior offer to the flawed and coercive transaction constructed by Richard Baker. The Catalyst offer is independently financed, superior in both value and treatment of shareholders and can be completed in a timely manner.
“It has been a revelation to us how far Richard Baker will go to acquire this iconic company for as cheaply as possible, without putting up a penny of his own money. Last year insiders disclosed a value of $28 per share for the real estate and now they want us to believe that over $2.5 billion of value has conveniently and suddenly disappeared. HBC has not protected its minority shareholders and has allowed its large and sophisticated shareholders, apparently in breach of a standstill and duty of confidence, to create a control position with the benefit of insider information. This ultimately led to a corrupted valuation process in which metrics were handpicked to guide to a desired conclusion.
“Shareholders deserve and demand better. The HBC Board now has the opportunity to fulfill its fiduciary duty and maximize value for all shareholders. Catalyst is committed to taking the necessary steps to ensure that its superior offer is evaluated on its merits and that the Board is able to liberate itself from the coercive influence of Richard Baker and act for us all. We are prepared to participate in an open, fair and competitive auction process.”
Catalyst Files Complaint with the Ontario Securities Commission
Catalyst has reviewed in detail the disclosures by HBC related to the Insider Issuer Bid, the Company’s background to the Baker Group proposal and agreement as well as historical disclosures. Catalyst believes that the conduct by the Baker Group is unprecedented in the manner in which insiders of the Company have designed and put forward a coercive offer through a non-arm’s length process that sought to preclude alternative bidders. The Insider Issuer Bid follows an earlier failed attempt by Richard Baker to acquire the Company and is inconsistent with HBC’s consistently bullish claims about the value of the underlying real estate. As a result, Catalyst was compelled to file a complaint with the Ontario Securities Commission (the “OSC“) regarding various matters, some of which are outlined below.
Timing of SIGNA Transaction is Highly Suspect
On June 10, 2019, at 8:56 AM, the Company announced the sale of its remaining European real estate and related joint venture to its partner SIGNA for $1.5 billion (“SIGNA Transaction“).
On June 10, 2019, at 9:01 AM, the Baker Group announced their initial $9.45 per share offer
It would appear unlikely that the Baker Group could have announced the offer so quickly, which was structured to be contingent upon completion of the SIGNA Transaction, without access to material confidential information. This raises fundamental issues of fairness and is deeply troubling.
Negotiations Were Not Arm’s Length
The Company has stated that the Baker Group Agreement was negotiated between the Company on “one side” and key Company management and advisors on “the other side”
Baker Group’s and Management’s Incentives are Unknown
Benefits to the Baker Group and management are disproportionate to those of minority shareholders
Misrepresentations in Circular and Related Breaches of Securities Law
Corrupted Valuations
The valuations and appraisals relied upon by the Special Committee are corrupted, thereby understating the true value of the Company’s real estate
OSC Needs to Act
The Insider Issuer Bid is the result of a deeply flawed process. The Insider Issuer Bid, and the negotiations among the Baker Group leading up to the making of that proposal, could only have been made based on material information that was not generally disclosed. The proposal and related negotiations thus likely involved breaches of management and director fiduciary duties and related duties of confidence. In addition, the Baker Group was formed with the goal of seeking to negate key aspects of the mandate of the Special Committee, including the consideration of any alternative transactions available to the Company, and otherwise acted in a coercive manner to undermine the Special Committee. If this type of transaction and conduct is condoned, it would serve to undermine confidence in the fairness and integrity of the capital markets overall. Catalyst implores the OSC to examine the Insider Issuer Bid and take appropriate action.
Advisors
BTIG, LLC is serving as financial advisor to Catalyst and McMillan LLP as Canadian counsel, and Brown Rudnick LLP and Latham & Watkins LLP as U.S. counsel. Gagnier Communications is serving as strategic communications counsel. Laurel Hill Advisory Group is serving as shareholder communications advisor and information agent.
We urge fellow shareholders to vote AGAINST the Insider Issuer Bid utilizing the proxy mailed to you by HBC
We urge shareholders to VOTE AGAINST the Insider Issuer Bid and all related proposals to be voted upon at the HBC shareholders’ meeting scheduled for December 17, 2019 (the “Meeting“). Your vote matters.
We thank shareholders for their strong support to date. The rejection of the Insider Issuer Bid is a key step for the maximization of shareholder value. Notwithstanding the threats of Mr. Baker and the Company regarding declining share prices if we reject their proposal, we can act together to enhance shareholder value.
IF YOU HAVE ALREADY VOTED ON THE PROXY CARD SENT TO YOU BY HBC AND WANT TO CHANGE YOUR VOTE, YOU CAN STILL DO SO BY SIMPLY RECASTING YOUR VOTE AGAINST. ONLY YOUR LATEST DATED PROXY CARD WILL COUNT.
If you have any questions, or need help executing your vote, contact Laurel Hill Advisory Group at: 1-877-452-7184 or 1-416-304-0211 or email assistance@laurelhill.com. There is a team standing by to assist you.
Additional Information
Catalyst is relying on the exemption under section 9.2(4) of National Instrument 51‐102 ‐ Continuous Disclosure Obligations to make this public broadcast solicitation. The following information is provided in accordance with corporate and securities laws applicable to public broadcast solicitations.
This solicitation is being made by Catalyst, and not by or on behalf of the management of HBC. Laurel Hill Advisory Group will receive a fee of $50,000 for its services as Information Agent plus ancillary payments and disbursements. Based upon publicly available information, HBC’s registered office is at 401 Bay Street, Suite 500, Toronto, Ontario, Canada M5H 2Y4 and its head office is at 8925 Torbram Road, Brampton, Ontario, Canada L6T 4G1. Catalyst is soliciting proxies in reliance upon the public broadcast exemption to the solicitation requirements under applicable Canadian corporate and securities laws, conveyed by way of public broadcast, including press release, speech or publication, and by any other manner permitted under applicable Canadian laws. In addition, this solicitation may be made by mail, telephone, facsimile, email or other electronic means as well as by newspaper or other media advertising and in person by employees of Catalyst. All costs incurred for the solicitation will be borne by Catalyst.
A registered shareholder who has given a proxy may revoke the proxy before it has been exercised by: (i) completing a proxy form that is dated later than the proxy form being revoked and mailing or faxing it to TSX Trust Company so that it is received before 10:00 a.m. (Toronto time) on December 13, 2019 or, if the Meeting is adjourned or postponed, 48 hours prior to the time of the Meeting (excluding Saturdays, Sundays and holidays); (ii) sending a revocation notice in writing to the Corporate Secretary of the Company at its registered office so that it is received at any time up to and including the last business day before the date of the Meeting (the notice can be from the shareholder or the authorized attorney of such shareholder); (iii) making a request in writing to the chair of the Meeting that its proxy be revoked; or (iv) any other manner permitted by law. A non‐registered shareholder may revoke a form of proxy or voting instruction form given to an intermediary at any time by written notice to the intermediary in accordance with the instructions given to the non-registered shareholder by its intermediary. Non-registered shareholders should contact their broker for assistance in ensuring that forms of proxies or voting instructions previously given to an intermediary are properly revoked. None of Catalyst and its directors and officers, or, to the knowledge of Catalyst, any associates or affiliates of the foregoing, has any material interest, direct or indirect, in any transaction since the commencement of HBC’s most recently completed financial year, or in any proposed transaction which has materially affected or will materially affect HBC or any of its subsidiaries, other than as set out herein. None of Catalyst or, to its knowledge, any of its associates or affiliates, has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter to be acted upon at any upcoming shareholders’ meeting, other than as set out herein.
Catalyst continues to consider certain other actions to oppose the Insider Issuer Bid and ensure the success of its offer, including speaking with certain securityholders of the Company and other persons, and the solicitation of proxies from securityholders of the Company in opposition to the Insider Issuer Bid and regarding related matters. Catalyst continues to believe that it and other shareholders of the Company, who taken together beneficially own or exercise control or direction over a sufficient number of Common Shares to prevent shareholder approval of the Insider Issuer Bid, will vote against the Insider Issuer Bid. Depending on market conditions and other factors, Catalyst may in the future increase or decrease its control or direction over securities of the Company through open market transactions, private agreements or otherwise. This press release is also issued pursuant to National Instrument 62-103 – The Early Warning System and Related Take-Over Bid and Insider Reporting Issues, which requires a report to be filed on SEDAR (www.sedar.com) containing additional information with respect to the foregoing matters. To receive a copy of the early warning report filed in respect of the above matters, please contact Dan Gagnier as outlined below.