Catalyst Capital Group Inc. achieved a small victory in its campaign to block a takeover of Hudson’s Bay Co. on Dec. 11, winning an opportunity to pursue its case in front of the Ontario Securities Commission.

The OSC granted Catalyst standing in the case, deciding it was in the public interest to go ahead with a hearing on Catalyst’s application to stop or delay a $10.30-per-share takeover offer from chairman Richard Baker’s group of shareholders.

“For at least six months, the investing public has been kept in the dark,” Catalyst lawyer Adam Chisholm told the OSC’s three-person panel. “Many minority shareholders will not have the sophistication or the resources to bring an application to the commission. I’m thinking about retail investors who own shares of this company.”

Commission vice-chair Grant Vingoe announced his decision in a short statement after the panel deliberated during a 20-minute recess.

The Baker group warned against granting Catalyst standing, arguing it would water down a provision that allows third parties to bring applications before the commission in matters of public interest. Typically, only commission staff bring matters before the commission.

But commission staff, represented by Charlie Pettypiece, agreed with giving Catalyst standing, arguing that the matter raised “fundamental securities law issues.”

Catalyst, HBC’s largest minority shareholder, has signalled it has enough support to block the deal in a shareholder vote scheduled for Dec. 17. It has also floated its own bid to buy HBC at $11 per share.

On Dec. 11, HBC lawyer Seumas Woods questioned the timing of Catalyst’s application, so close to next week’s vote.

“They’ve left it very late in the day,” he said, calling Catalyst’s position “long on rhetoric … short on substance.”

Vingoe, the OSC vice-chair, challenged HBC’s criticisms of the last-minute nature of Catalyst’s request for a hearing. HBC complained Catalyst didn’t request a hearing for weeks following HBC’s release of a management circular on the deal. But Vingoe pointed to an HBC news release late on Dec 6 night, which updated HBC’s official account on how the deal came together. The release gave additional information about how the special committee waived a standstill provision to allow shareholder Fabric Luxembourg Holdings S.a.r.l. to join the Baker group’s bid.

By updating its account of the deal, HBC was essentially restating its circular. So while it was released in mid-November, Vingoe said, “it’s only complete very recently.”Prominent proxy advisors have also weighed in on the saga.

On Dec. 11, ahead of the hearing, Glass Lewis & Co., recommended that shareholders vote in favour the Baker group offer. Glass Lewis said the proposal offers shareholders certainty of value for their HBC shares at a sizeable market premium and a relatively attractive valuation. 

Institutional Shareholder Services, however, recommended that shareholders vote against the deal. ISS raised several concerns about the sale process, including around disclosures and the ability for the special committee to consider other proposals.

The hearing starts on Dec 12 with Catalyst’s cross-examination of David Leith, chair of the HBC special committee.

On Dec 15, Bloomburg reported that Richard Baker may scrap his offer to take the struggling retailer private after regulators delayed a vote on the deal following complaints from Catalyst. Baker’s group is “evaluating next steps, including terminating the transaction,” according to a memo sent to advisers. The group plans to make a final decision in a week or so, according to the note. Until then, it’s “pens down” until further notice, meaning no work is to be done on the deal.

The Baker group cited third-quarter results and a delay in the shareholder vote ordered by the Ontario Securities Commission. The decision to consider scrapping the offer comes after preliminary tallies showed the Baker group had fallen short of the necessary support from investors to proceed with the transaction, according to people familiar with the matter. The bid required the backing of a majority of the minority shareholders. The Baker group declined to comment.

“They, collectively, may come back with another offer to try to take the company private — Are they done? I don’t think so,” Bloomberg Intelligence analyst Poonam Goyal said of the group. “They just have to come up with a better price that makes sense for shareholders, too.”

Source: Bloomburg
Source: Financial Post
Source: Globe and Mail
Source: The Star
Source: CBC
Source: Financial Post
The Star