Catalyst Capital tops Richard Baker’s $1.9 billion offer for Hudson’s Bay Co
Catalyst Capital Group Inc., the private equity firm intent on blocking a bid to take over Hudson’s Bay Co., announced its own, richer bid on Wednesday morning, offering to buy the department store chain for $11 a share.
That offer is 70 cents higher than the one currently on offer from HBC chairman Richard Baker and his group of shareholders.
Catalyst, along with a contingent of minority shareholders, have dogged Baker throughout his group’s attempt to take HBC private, accusing them of undervaluing the retailers’ real estate holdings.
“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,” Catalyst managing director Gabriel de Alba said in a statement Wednesday.
The Baker group, however, has said that $10.30 per share is their final offer and that they won’t consider competing bids. In a statement earlier this week, the group stressed they were “buyers, not sellers.”
A TD Securities fairness opinion, commissioned by a special committee of the board of directors tasked with analyzing the Baker group deal, put the value of HBC real estate at $8.75 per share, well below previous company estimates in the range of $28 to $35 per share in the last two years. Last week, the special committee released independent appraisals on each of HBC’s 79 properties — most notably the company’s Saks Fifth Avenue flagship department store in Manhattan, which dropped from a valuation of $4.8 billion in 2014 to $2.1 billion this year.
“Last year insiders disclosed a value of $28 per share for the real estate,” de Alba said, “and now they want us to believe that over $2.5 billion of value has conveniently and suddenly disappeared.”
Catalyst said it has filed a complaint with the Ontario Securities Commission, accusing the Baker group of putting forward “a coercive offer through a non-arms’s length process that sought to preclude alternative bidders.” The OSC declined to comment on Wednesday morning.
“If this type of transaction and conduct is condoned,” Catalyst said, “it would serve to undermine confidence in the fairness and integrity of the capital markets overall.”
In an email, the Baker group cast doubt on the Catalyst offer and reiterated that the special committee had unanimously endorsed their bid.
“We believe Catalyst’s ‘offer’ is in fact a highly conditional, non-binding and non-executable proposal that is not supported by fully committed financing, and is intended to mislead HBC shareholders,” according to a statement from the Baker group. “We are confident that HBC shareholders recognize that our all-cash, fully financed premium offer of $10.30 per share provides them with immediate and certain value in a highly uncertain retail environment.”
Catalyst said its offer is independently financed with support from “large international financial institutions,” though it wasn’t immediately clear who was financing it. A source close to Catalyst said one is a global institution, the other is American. Catalyst can’t name them because it hasn’t yet received approval to do so, the source said.
Catalyst said it expects its offer could be put to a shareholder vote in February. The Baker group’s offer, approved by the HBC board of directors last month, will be put to a vote on Dec. 17, requiring approval from a majority of the minority shareholders. Catalyst has said it has support from enough minority shareholders to block the deal in next month’s vote.
“We urge fellow shareholders to vote AGAINST the Insider Issuer Bid,” Catalyst said Wednesday, adding that it was willing to let other shareholders join its offer and be co-equity sponsors.
“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.”
Catalyst is the largest minority shareholder of HBC, with roughly 17.48 per cent of outstanding common shares.
Land and Buildings Investment Management LLC, another prominent minority shareholder and longtime Baker critic, said it was considering taking Catalyst up on its offer to join the new bid.
“We continue to believe that the offer from the Richard Baker Group woefully undervalues Hudson’s Bay and its real estate,” Jonathan Litt, Land and Buildings founder, said in a statement. “We are encouraged by the news that Catalyst will proceed with a superior $1.5 billion offer for the Company, and Land & Buildings is interested in financially participating in this transaction with Catalyst should it move forward.”