- ISS Identifies Numerous Issues and Conflicts, Including Lack
of Disclosures and Defects in Sales Process, by Richard Baker, the Insider Group and the HBC
Board of Directors
TORONTO, Dec. 7, 2019 /PRNewswire/ - 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 ALREADY VOTED ON THE PROXY CARD SENT TO YOU BY HBC
AND WANT TO CHANGE YOUR VOTE, YOU CAN STILL DO SO BY SIMPLY
RECASTING YOUR VOTE AGAINST. ONLY YOUR LATEST DATED
PROXY CARD WILL COUNT.
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 assistance@laurelhill.com. 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
Email: assistance@laurelhill.com
1 Permission to quote from ISS' report was neither sought nor
obtained.
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SOURCE The Catalyst Capital Group Inc.