TORONTO -- Minority shareholders of Canada's oldest retailer are receiving conflicting advice on how to vote on a privatization bid by a group led by Hudson's Bay Co.'s executive chairman as the battle over the company's current value escalates and the voting deadline nears.
Two proxy advisory firms want shareholders to vote for the offer priced at $10.30 per share -- a position HBC's board of directors endorsed in late October and the company has since encouraged shareholders to back.
Meanwhile, another proxy advisory firm and a minority shareholder urge shareholders to dissent from towing the company line. An investment firm that controls about half a per cent of the company's outstanding common shares announced it planned to cast a ballot against the proposal.
The deadline to vote by proxy is early Dec. 13, while a special meeting for shareholders to vote is scheduled for Dec. 17. The vote requires approval from a majority of minority shareholders.
On Wednesday, Glass Lewis joined Egan-Jones in recommending the privatization transaction to shareholders.
The proposal offers shareholders certainty of value for their HBC shares at "a sizable market premium and a relatively attractive valuation," according to its report.
The Baker-led group's $10.30 per share offer is higher than the $9.45 per share it initially proposed.
Still, it falls 70 cents short of a competing offer from dissident shareholder Catalyst Capital Group, which controls about 17.49 per cent of HBC's common shares.
HBC's board rejected the unsolicited offer after Baker's group said it was "not interested in any transaction that would result in a sale of their interests in HBC," according to the company's statement outlining the decision.
Catalyst has since said its offer remains open if shareholders reject the bid from the Baker group.
Glass Lewis acknowledged some shareholders may be holding out for the possibility that the group led by Baker might eventually back an alternative offer, but said there was "no compelling evidence" that might happen.
Without completing the proposed transaction from the Baker-group, Glass Lewis believes "it is reasonable to expect that the company's share price would experience a substantial decline in value in the immediate term, with any future price recovery subject to further material uncertainty," the firm said.
HBC's shares have fallen for six consecutive days. Since the closed at $9.74 on Dec. 2 on the Toronto Stock Exchange, they've dropped to $8.78 by Tuesday's closing. HBC shares were down nine cents, or one per cent, to $8.69 in morning trading Wednesday.
Gabriel de Alba, managing director and a partner at Catalyst, said Glass Lewis ignored all of the issues related to the creation of the Baker Group and buys into the threat that the take under proposed by that group is the only option.
"ISS recognized these issues and called out the HBC board and the insider group," de Alba said in a statement.
"We continue to maintain our superior offer and believe there are other alternatives to maximize shareholder value. If the Board will not act in the best interest of all shareholders, Catalyst is prepared to seek Board change to ensure that the interests of minority shareholders are protected."
Egan Jones, another proxy advisory firm, also recommended the transaction the day prior. Egan Jones argued the transaction was a desirable approach to maximizing shareholder value.
David Leith, chair of the special committee HBC formed to review the privatization proposal, said in a statement that the committee is "pleased" with the recommendations.
These recommendations stand in contrast to one issued Monday by Institutional Shareholder Services Inc. It urged shareholders to vote against the bid.
ISS raised several concerns about the sale process, including around disclosures and the ability for the special committee to consider other proposals.
The special committee called that report "flawed" in a statement.
But already one minority shareholder, New York-based Ortelius Advisors L.P., announced Wednesday it planned to vote against the proposal. It also took issue with an updated information circular HBC released to shareholders on Dec. 6., which it said in a statement raised several additional, serious concerns around Baker's activity.
"The special committee's update just reinforces our decision to vote against Richard Baker's insider bid. There is a lot more troubling information in the release, which raises a whole new set of additional questions," said managing member Peter DeSorcy in a statement.
The investment manager filed a lawsuit Dec. 6 at the Ontario Superior Court of Justice in an effort to block the bid and have HBC amend its information circular, which it alleges is misleading.
Ortelius controls all decisions related to the buying and selling of Pangaea Venture's L.P.'s securities, including 876,450 of HBC's common shares.
The special committee declined to comment on Oretlius's position, while HBC and representatives for the Baker-led group did not immediately respond to a request for comment on Ortelius's position.
Ortelius's announcement and Glass Lewis's recommendation came as HBC and Catalyst were set to have a hearing at the Ontario Securities Commission on Wednesday.
Catalyst has asked the regulator to block the privatization bid or, at least, require HBC to amend its information circular.
This report by The Canadian Press was first published Dec. 11, 2019
