Canadian retailer Hudson's Bay Co (HBC.TO) said on Friday it reached an agreement with shareholder Land & Buildings, under which the activist investor would withdraw its appeal against the conditional approval given for an investment by Rhone Capital.

HBC, which owns the upscale Saks Fifth Avenue department store brand, in October received a $500 million investment from private equity firm Rhone in the form of eight-year mandatory convertible preferred shares. Land & Buildings head Jonathan Litt said the investment was not in the best interests of minority shareholders.

The agreement helps ease tensions that have escalated since the deal was announced, with Litt seeking to prevent a final approval of the investment by the Toronto Stock Exchange, and HBC accusing Land & Buildings of misleading investors.

Land & Buildings, which owns about 5 per cent of HBC, is pushing the department store operator to monetize its real estate and sell Saks Fifth Avenue in an effort to turn around the business, which is facing a brutal retail market.

As a concession to Litt, the Toronto-based company said that if it issues new shares in a way that triggers a price protection feature available to Rhone for a year as part of the deal, it would do the issuance as a rights offering available to all its investors on a pro rata basis.

Hudson's Bay shares were up 1 per cent at 12:46 p.m. ET, compared with the S&P 500 retail index's 0.6 per cent decline, and the Toronto stock 's 0.16 per cent drop.