Hudson’s Bay Chair Wins Glass Lewis Support for Takeover

(Bloomberg) -- Hudson’s Bay Co. Chairman Richard Baker’s C$1.9 billion ($1.4 billion) plan to take the Canadian retailer private got a boost from a prominent shareholder advisory firm.

Glass Lewis & Co. urged investors in the owner of Saks Fifth Avenue to support the transaction at a shareholder meeting Dec. 17. It argued that there’s no viable alternative deal on the table given that Baker’s group, which owns roughly 57% of the company, said it won’t sell its shares to anyone else.

While some shareholders may be holding out for the Baker group to reverse its stance and sell at a higher price, Glass Lewis said that appeared unlikely. In the absence of other viable options, the advisory firm said that Hudson’s Bay’s stock would probably fall further in the face of a challenging retail environment if the deal fails.

Catalyst Capital Group Inc., which owns a 17.5% stake in the company, has come out against the deal and offered a counter-proposal to buy Hudson’s Bay for C$11 a share, a 7% premium on the Baker group’s bid. The retailer has rejected the proposal from the private equity firm, arguing it’s not viable because the Baker group has said it won’t sell to another buyer.

“We simply see no viable path for the Catalyst proposal to achieve any of the requisite shareholder vote hurdles at this time,“ Glass Lewis said in a report dated Tuesday. “Therefore, we believe it would be nonsensical for the board to terminate the arrangement agreement.”

Glass Lewis’s conclusion puts it at odds with another prominent advisor, Institutional Shareholder Services Inc., which last week urged investors to reject the deal. ISS argued that the company offered no clear reason shareholders should accept it when Catalyst has proposed a higher price. Given the defects identified in the sales process, investors could not be confident they are receiving maximum available value for their shares, ISS said.

A third shareholder advisory firm, Egan-Jones Proxy Services, has also supported the deal.

Hudson’s Bay fell for a seventh straight session in Toronto, down 1.4% to C$8.66 a share as of 9:55 a.m. That’s well below the offer price of C$10.30 a share from the Baker group, as investors fear the deal won’t win the necessary support from a majority of minority holders.

Hudson’s Bay said it was pleased Glass Lewis and Egan-Jones supported the deal.

“The support of these independent proxy advisors further demonstrates that this transaction represents the best path forward for HBC,” David Leith, chair of Hudson’s Bay’s special committee, said in a statement.

Catalyst once again urged shareholders to vote against the deal Wednesday, and said it would seek changes to the board if the company’s independent directors don’t act in the best interest of shareholders.

The Canadian private equity firm said the Glass Lewis report ignored all the issues related to the creation of the Baker group and “buys into the threat that the take under proposal by the group is the only option.”

“It is somewhat shocking that they would turn a blind eye to all of the conflicts, manipulations and intentionally misleading and incomplete disclosures,” said Gabriel de Alba, Catalyst partner and managing director, in a statement.

Catalyst has filed a complaint with the Ontario Securities Commission seeking to block the Baker group’s takeover, which will be heard starting Wednesday in Toronto. Another investor, Ortelius Advisors, which said it owns a 0.5% stake in Hudson’s Bay, has also filed a lawsuit to block the deal.

To contact the reporter on this story: Scott Deveau in New York at sdeveau2@bloomberg.net

To contact the editors responsible for this story: Liana Baker at lbaker75@bloomberg.net, Eric Pfanner, David Scanlan

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