Hudson’s Bay Corp. chairman Richard Baker and his partners have approached minority shareholders, including Catalyst Capital Group, about potentially increasing their offer to take the Canadian department store chain private, according to multiple reports.
Baker has suggested the idea of raising the offer to around $11 a share from $10.30 a share, roughly the same price Catalyst offered in November for the parent company of Saks Fifth Avenue.
Collectively, Baker and his allies own 57% of HBC, but they need a majority of the minority shareholders on board for the deal to go through. Catalyst, which is run by Newton Glassman, is one of the main minority stakeholders that Baker’s group needs to sway. The Toronto-based private equity firm owns a 17.5% stake in the retailer, which amounts to 32% of minority shareholder votes.
However, Catalyst has voiced concerns about whether the privatization of HBC can in fact be accomplished after several issues were raised by the Ontario Securities Commission last month. Catalyst believes the deal significantly undervalues Hudson’s Bay Co.’s real estate holdings and that it does not provide sufficient disclosure to shareholders.
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Amid its bid to go private, HBC continues to face challenges. The retailer’s losses widened to $CA226 million ($171 million) from $CA161 million ($122 million) in the most recent quarter (compared with the prior-year period). Revenues remained flat at $CA1.84 billion ($1.39 billion), and comps slid 1.7%.
“In the third quarter, we faced our toughest comp, soft industry-wide luxury sales and the challenge of winning back market share in Canada,” CEO Helena Foulkes said in a statement. “Strong digital growth, continued cost containment and inventory control were not enough to deliver the financial performance we wanted.”
The market reacted positively to the news of a potential deal, with shares in HBC climbing as much as 24% on Tuesday. Today, the stock continues to trade at around $9.73 — one of its highest rates in a month.
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