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Nov 4, 2019

Former pension fund exec skeptical new HBC bid will happen

Taking HBC private would allow 'a proper return' for Richard Baker: Former HBC insider

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A former director at one of Canada’s largest pension funds is skeptical there will be another bid to take over Hudson’s Bay Company.  

“I think one thing that Catalyst [Capital] has cited is potential for strategic takeout – it’s not something I really see,” Geoff Barratt, a former director of relationship investing at Ontario Teachers’ Pension Plan who helped advise HBC in its 2013 purchase of Saks Inc., said in an interview with BNN Bloomberg Monday.

Barratt added it’s “not realistic” to expect backing from a private equity firm, or a company already involved in retail or real estate.  

Barratt said if private equity or strategic money were interested in making a large new investment in the sector, Macy’s Inc. wouldn’t be trading at such a low valuation, and Nordstrom Inc. – which he called “best of breed” in the industry – would have been able to get private equity money to finance its own plan to go private.  

“If those two things can’t happen, and Hudson’s Bay is bleeding cash, what makes someone think a strategic investor would actually come in and buy that company?,” Barratt said.

On Oct. 21, HBC’s board recommended shareholders accept a cash offer of $10.50  from an investor group led by HBC Chairman Richard Baker. However on Oct. 31, a minority shareholder group led by Catalyst Capital called on shareholders to reject the offer, saying it was aware of a number of strategic investors that were interested in participating in an open sale process for HBC.  

Barratt detailed other recent negatives for HBC, citing the shareholder dilution impact of HBC’s reorganization of its European operations, as well as increased competition in the New York City market that is key for HBC’s Saks stores.

However, Barratt said he thinks there will be a negotiation between the shareholder groups and HBC’s board that will lead to an agreed takeover price.