(Bloomberg) -- A special committee at Hudson’s Bay Co. rejected an offer by private-equity firm Catalyst Capital Group Inc. that values the Canadian retailer at more than C$2 billion ($1.5 billion), giving the upper hand to a lower bid by the company’s chairman.
The offer presented last week by Catalyst is “not reasonably capable of being consummated,” the committee said in a statement late Monday. Catalyst’s proposal of C$11 a share represented a 6.8% premium to the C$10.30 a share that Hudson’s Bay Chairman Richard Baker and his partners agreed to pay in October, and which the committee and the board backed.
Baker and his allies “confirmed to the Special Committee today that they, in their capacity as shareholders, are not interested in any transaction that would result in a sale of their interests in HBC,” according to the statement.
Since the group own 57%, and the Catalyst offer requires at least three-quarters of votes, it means the transaction can’t be completed, the committee said.
The response is the latest twist in the battle for the struggling retailer, which Baker said he wants to turn around outside the glare of public markets. The rivalry next moves to Dec. 17, when shareholders are set to vote on Baker’s offer.
Catalyst, which holds a 17.5% stake in Hudson’s Bay, said in a statement late Monday that it filed for a hearing with the Ontario Securities Commission, seeking to prohibit the Baker group transaction and postpone the Dec. 17 vote. Catalyst asked the OSC’s assistance to redress what it claims is inadequate and inaccurate disclosures to shareholders.
The Toronto-based investment firm run by Newton Glassman has urged fellow shareholders to vote against the Baker offer, saying it undervalues the department store chain.
Catalyst is concerned about the value Hudson’s Bay has recently ascribed to its real estate, which amounted to about C$8.75 a share, people familiar with the matter told Bloomberg last week. In particular, it’s questioning why the value of the retailer’s flagship Saks Fifth Avenue store in Manhattan fell sharply in a recent appraisal, they said.
The Baker group shot back at the Catalyst offer early Tuesday, calling it an “illusory” bid that would saddle the company with debt.
“Catalyst’s reckless financing plans would swiftly add the company to the long list of retailers that have been forced to close their doors, shed jobs and impact pensioners,” the group said in a statement. “Catalyst has a track record of failing to execute on its promises and of engaging in conduct that is viewed critically by many participants in the capital markets.”
The special committee of independent directors was formed in June by the Hudson’s Bay board to evaluate Baker’s proposal with help from financial and real estate experts. In the past few weeks, the company went out of its way to win support for the offer, releasing hundreds of pages of documents, including building-by-building appraisals.
Baker said the terms of the deal it reached in October would be its “best and final offer.”
Hudson’s Bay shares rose 0.2% to C$9.74 in Toronto on Monday. The stock has plunged by about two-thirds in the past five years as the company has faced growing competition from sellers like Amazon.com Inc., joining other department store chains that are losing ground to online shopping.
(Updates with Baker group comment from ninth paragraph)
--With assistance from Scott Deveau and David Scanlan.
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