ISS Recommends that Hudson’s Bay Company Shareholders Vote AGAINST the Baker Group Transaction

TORONTO, Dec. 7, 2019 /CNW/ – The Catalyst Capital Group Inc., on behalf of investment funds managed by it, (“Catalyst“) today announced that Institutional Shareholder Services (“ISS“), a leading independent proxy advisory service, has recommended that Hudson’s Bay Company (TSX: HBC) (“HBC” or the “Company“) shareholders vote “AGAINST” the Company-sponsored share buyback (the “Insider Issuer Bid“) outlined in the October 20, 2019 arrangement agreement (the “Baker Group Agreement“) between insiders led by Mr. Richard Baker (the “Baker Group“) and the Company.

Gabriel de Alba, Managing Director and Partner of Catalyst, said, “ISS has clearly called out the HBC Board and the insider group, led by Executive Chairman Richard Baker, for their egregious pattern of conflicts, misrepresentations and self-serving games.  From the purposely manufactured Baker control group to lack of disclosures and waivers of shareholder protections through to the sales process and acceptance by the special committee of a low-ball offer, funded with minority shareholders’ own money, this process was designed to transfer value from minority shareholders to Richard Baker and his selected insiders.  Given the lack of transparency and ever shifting excuses by the Baker Group, we are concerned about existing questions that remain unanswered and what additional actions and agreements remain undisclosed.” 

Added Mr. de Alba, “Catalyst has been working to protect the interests of the minority shareholders, including offering all shareholders a superior proposal to the Baker Group. We will continue to push the HBC independent directors to finally step up and do their duty to protect shareholders, run a true value maximization process and restrict the coercive and questionable efforts of Richard Baker.”

In its December 6, 2019, report, ISS recognized the significant flaws with respect to the sale process, questioned the value of the Special Committee’s contribution and lack of optionality the Special Committee created for the Company and concluded that there is no legitimate rationale for recommending the Insider Issuer Bid in light of a legitimate outstanding offer at a higher price. 

In its report ISS made the following conclusion and recommendation1:

“Catalyst Capital Group Inc., holder of 17.5 percent of common shares, has publicly opposed the transaction and has made an offer to acquire the remaining outstanding shares for $11.00 in cash per share.  The only defect identified by the board’s special committee with the competing bid has been the opposition to Catalyst’s offer from the continuing shareholders (who are likewise seeking to acquire the company, but at a lower price); the committee has not questioned the Catalyst proposal’s financing or ability to win regulatory approval.”

“Given that significant defects have been identified with the sale process, shareholders cannot be confident they are receiving maximal available value for their shares.  Although the special committee appears to have restricted its own ability to determine that $11.00 is in fact superior to $10.30 by agreeing to a narrow definition of a “superior proposal” in the arrangement agreement, there is no legitimate rationale from a governance perspective for recommending that shareholders accept C$10.30 cash per share in light of what appears to be a legitimate outstanding offer to purchase the company at a higher price.  As such shareholders are advised to vote AGAINST the acquisition by the continuing shareholders.”

Regarding the Special Committee, ISS said:

“It appears that the special committee handcuffed itself by recommending an agreement that defines a superior proposal as something that could never happen. If there is i) a controlling shareholder group that will not agree to sell its shares to any other party or allow the distribution of the proceeds from a sale of material assets, and ii) the special committee defines a superior proposal as one that is reasonably capable of being completed, and iii) agreement from the controlling shareholder is a necessary element of completing an alternative transaction, then shareholders must question whether the special committee has effectively tied its own hands.”

“However, HBC was not a controlled company prior to the board’s waiver of the Fabric standstill.  In fact, Baker’s individual holdings account for 6.3 percent of HBC shares outstanding.  By waiving the standstill and allowing Baker to form a group controlling 58 percent of the voting power, the board appears to have sacrificed negotiating leverage in exchange for a proposal, in its own words, was inadequate.”

Regarding Fabric Luxembourg (member of the Baker Group), ISS said:

“On Oct. 26, 2017, HBC shareholder Fabric Luxembourg entered a standstill agreement that limited its interest in HBC to no more than 45 percent of outstanding common shares.  The standstill agreement was confirmed most recently on July 17, 2018.  In engagement with ISS, the special committee indicated that Fabric Luxembourg sought HBC’s consent for its participation in the shareholder group.  The board (with authorization from the special committee) waived the standstill at some point between March 26 (when the special committee was re-formed) and June 10 (when the C$9.45 proposal was made). Although the board has acknowledged to ISS that it granted the standstill waiver, investors who purchased shares prior to June 10, under the impression that Fabric Luxembourg was subject to a standstill, would likely have benefited from knowing when Fabric Luxembourg began considering a buyout and when the standstill was waived.

Regarding the Baker Group and the Signa transaction, ISS said:

“The initial unsolicited proposal was revealed on June 10, shortly after HBC announced its agreement to sell its portion of the European operations and assets it shared with SIGNA. In light of i) the materiality of the SIGNA transaction onto HBC’s value, ii) the possible conflict of interest between Baker as executive chairman voting on an asset sale and Baker as unsolicited acquirer, and iii) the absence of a positive disclosure that members of the continuing shareholder consortium had no knowledge of the SIGNA transaction, it is reasonable that shareholders could question whether material nonpublic information was used to assemble the consortium of continuing shareholders. This concern must then necessarily lead to questions about the thoroughness of the sale process and whether the agreed transaction maximizes value for minority shareholders.”

Continued Mr. de Alba, “As we have said repeatedly, we are prepared to support this iconic company for the long term.  Richard Baker’s threats of value destruction and operating erosion need to change to actions to unlock value for all shareholders.  Until such time that the Board engages on our offer and runs a fair and open process to maximize value, and the Baker insiders are released from their voting agreement, Catalyst will continue to reject any coercive offer and urges other shareholders to vote against the arrangement resolution.”   

Catalyst has filed a notice of application for a hearing with the Ontario Securities Commission seeking redress for inadequate and inaccurate disclosure, and coercive and unfair practices leading up to and following the HBC Board approval of the Insider Issuer Bid.

We urge shareholders to VOTE AGAINST the Insider Issuer Bid and all related proposals to be voted upon at the HBC shareholders’ meeting scheduled for December 17, 2019 (the “Meeting”). Your vote matters. 

We thank shareholders for their strong support to date. The rejection of the Insider Issuer Bid is a key step for the maximization of shareholder value. Notwithstanding the threats of Mr. Richard Baker and the Company regarding declining share prices if we reject their proposal, we can act together to enhance shareholder value. 


If you have any questions, or need help executing your vote, contact Laurel Hill Advisory Group at: 1-877-452-7184 or 1-416-304-0211 or email There is a team standing by to assist you.

Additional Information

Catalyst is relying on the exemption under section 9.2(4) of National Instrument 51‐102 ‐ Continuous Disclosure Obligations to make this public broadcast solicitation. The following information is provided in accordance with corporate and securities laws applicable to public broadcast solicitations.

This solicitation is being made by Catalyst, and not by or on behalf of the management of HBC. Laurel Hill Advisory Group will receive a fee of $50,000 for its services as Information Agent plus ancillary payments and disbursements. Based upon publicly available information, HBC’s registered office is at 401 Bay Street, Suite 500, Toronto, Ontario, Canada M5H 2Y4 and its head office is at 8925 Torbram Road, Brampton, Ontario, Canada L6T 4G1. Catalyst is soliciting proxies in reliance upon the public broadcast exemption to the solicitation requirements under applicable Canadian corporate and securities laws, conveyed by way of public broadcast, including press release, speech or publication, and by any other manner permitted under applicable Canadian laws. In addition, this solicitation may be made by mail, telephone, facsimile, email or other electronic means as well as by newspaper or other media advertising and in person. All costs incurred for the solicitation will be borne by Catalyst.

A registered shareholder who has given a proxy may revoke the proxy before it has been exercised by: (i) completing a proxy form that is dated later than the proxy form being revoked and mailing or faxing it to TSX Trust Company so that it is received before 10:00 a.m. (Toronto time) on December 13, 2019 or, if the Meeting is adjourned or postponed, 48 hours prior to the time of the Meeting (excluding Saturdays, Sundays and holidays); (ii) sending a revocation notice in writing to the Corporate Secretary of the Company at its registered office so that it is received at any time up to and including the last business day before the date of the Meeting (the notice can be from the shareholder or the authorized attorney of such shareholder); (iii) making a request in writing to the chair of the Meeting that its proxy be revoked; or (iv) any other manner permitted by law. A non‐registered shareholder may revoke a form of proxy or voting instruction form given to an intermediary at any time by written notice to the intermediary in accordance with the instructions given to the non-registered shareholder by its intermediary. Non-registered shareholders should contact their broker for assistance in ensuring that forms of proxies or voting instructions previously given to an intermediary are properly revoked. None of Catalyst and its directors and officers, or, to the knowledge of Catalyst, any associates or affiliates of the foregoing, has any material interest, direct or indirect, in any transaction since the commencement of HBC’s most recently completed financial year, or in any proposed transaction which has materially affected or will materially affect HBC or any of its subsidiaries, other than as set out herein. None of Catalyst or, to its knowledge, any of its associates or affiliates, has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter to be acted upon at any upcoming shareholders’ meeting, other than as set out herein.

Shareholders with questions or who need assistance with their proxies can contact the Information Agent:

Laurel Hill Advisory Group
North America Toll Free: 1-877-452-7184
Collect Calls outside North America: 1-416-304-0211

1 Permission to quote from ISS’ report was neither sought nor obtained.

SOURCE The Catalyst Capital Group Inc.

For further information: MEDIA INQUIRIES: Dan Gagnier / Jeffrey Mathews, Gagnier Communications, Phone: 1-646-569-5897, Email :

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