Proxy advisory firms back bid to take HBC private

By

Robin Driver

Published
Feb 18, 2020

As debate about the transaction rages on, three leading proxy advisory firms have recommended that Hudson’s Bay Company (HBC) shareholders vote in favour of the deal that would see a group led by the company’s executive chairman, Richard Baker, take the retailer private.

 
The three firms, Institutional Shareholder Services (ISS), Glass Lewis and Egan-Jones, have all backed the transaction, which would involve the Baker-led group paying HBC’s minority shareholders C$11.00 per share for their stakes in the Canadian company.
 
ISS described the deal as the “best available alternative for minority shareholders,” highlighting the risks associated with attempts to execute HBC’s standalone strategy in the current retail environment.

The firm further pointed out that the price being offered by Baker’s group, which also includes Rhône Capital LLC and We Work Property Advisors, among other shareholders, has twice been increased from an initial proposal of C$9.45 per common share, thanks to extensive negotiations.
 
Glass Lewis also emphasized the value of the deal for minority shareholders by warning against industry headwinds and pointing out the company’s deteriorating profitability in recent years.
 
On top of this, the firm asserted that the signing of a voting support agreement with Catalyst Capital – an HBC minority shareholder which, along with Paradise Developments, has been one of the most vocal opponents of the deal – should make the transaction more likely to go through.
 
For its part, Egan-Jones stated that the deal is “a desirable approach in maximizing shareholder value,” claiming that “its advantages and opportunities outweigh the risks.”
 
“We are pleased that all three proxy advisory firms have recommended in favor of the privatization transaction,” said David Leith, chair of the special committee that approved the take-private deal in October of last year. “Their positive recommendations are consistent with the special committee’s view that this transaction is in the best interests of the company, is fair to the minority shareholders, and provides certain and immediate value at a significant market premium.”
 
With HBC shareholders set to vote on the transaction at a special meeting on February 27, 2020, industry observers won’t have to wait much longer to find out if Baker and his group, who collectively own a 57% stake in the company, will be successful in their bid to take the retailer private.
 
HBC, which owns Saks Fifth Avenue, Saks Off 5th and Hudson’s Bay, has been struggling to adapt to changes in the retail environment over the past few years. The company sold its Lord & Taylor banner to Le Tote for $75 million in August of last year and also shuttered its operations in the Netherlands as it sought to turn its fortunes around.

In December, the company reported a third-quarter net loss of C$175 million on revenues of C$1.8 billion.