- Glass Lewis Ignores the Central Issues of How the Baker Group
was Formed and Misleading and Incomplete Disclosures, Which Created
a Flawed Process and a Coercive Transaction
- ISS Correctly Identified 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. 11, 2019 /CNW/ - The Catalyst Capital Group
Inc., on behalf of investment funds managed by it,
("Catalyst") today commented on the recommendation by Glass
Lewis to Hudson's Bay Company
(TSX: HBC) ("HBC" or the "Company") shareholders in
regards to 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, "Glass Lewis ignored all of
the issues related to the creation of the Baker Group and buys into
the threat that the take under proposed by that group is the only
option. It is somewhat shocking that they would turn a blind
eye to all of the conflicts, manipulations and intentionally
misleading and incomplete disclosures, particularly in this day and
age."
Added Mr. de Alba, "ISS recognized these issues and 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. HBC's independent directors need to step up and do
their duty to protect shareholders and restrict the coercive and
questionable efforts of Richard
Baker. We continue to maintain our superior offer and
believe there are other alternatives to maximize shareholder
value. If the Board will not act in the best interest of all
shareholders, Catalyst is prepared to seek Board change to ensure
that the interests of minority shareholders are protected."
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
recommendation:1
"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."
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.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this press release, including
statements regarding Catalyst's commitment to taking steps to
change the composition of the board of directors of
HBC, Catalyst maintaining its superior offer and the
shareholders of HBC acting together to enhance shareholder value,
contain "forward-looking statements" and are prospective in nature.
Forward-looking statements are not based on historical facts, but
rather on current expectations and projections about future events,
and are therefore subject to risks and uncertainties that could
cause actual results to differ materially from the future results
expressed or implied by the forward-looking statements. Often, but
not always, forward-looking statements can be identified by the use
of forward-looking words such as "plans", "expects", "intends",
"anticipates", or variations of such words and phrases or
statements that certain actions, events or results "may", "could",
"should", "would", "might" or "will" be taken, occur or be
achieved. Although Catalyst believes that the expectations
reflected in such forward-looking statements are reasonable, such
statements involve risks and uncertainties, and undue reliance
should not be placed on such statements. Material factors or
assumptions that were applied in formulating the forward-looking
information contained herein include the assumption that Catalyst
will be able take steps to change the governance of HBC by
installing independent directors, the assumption that Catalyst will
be able to secure the necessary financing to complete its proposed
offer, that shareholders will successfully oppose the Insider
Issuer Bid, the business and economic conditions affecting HBC's
operations will continue substantially in the current state,
including, without limitation, with respect to industry conditions,
general levels of economic activity, continuity and availability of
personnel and third party service providers, local and
international laws and regulations, foreign currency exchange rates
and interest rates, inflation, and taxes, and that there will be no
unplanned material changes to HBC's facilities, operations and
customer and employee relations. Catalyst cautions that the
foregoing list of material factors and assumptions is not
exhaustive. Many of these assumptions are based on factors and
events that are not within the control of Catalyst and there is no
assurance that they will prove correct. Important factors that
could cause actual results, performance or achievements to differ
materially from those expressed or implied by such forward-looking
statements include, among other things, actions taken by HBC or the
Baker Group with respect to the Insider Issuer Bid and agreements
entered into among HBC and the Baker Group, Catalyst's ability to
secure the necessary financing to complete the Catalyst offer
(which financing is subject to customary conditions including
satisfactory due diligence), Catalyst's ability to install
independent directors, industry risk and other risks inherent in
the running of the business of HBC, foreign currency exchange rates
and interest rates, general economic conditions, legislative or
regulatory changes, changes in income tax laws, and changes in
capital or securities markets. These are not necessarily all of the
important factors that could cause actual results to differ
materially from those expressed in any of Catalyst's
forward-looking statements. Other unknown and unpredictable factors
could also impact its results. Many of these risks and
uncertainties relate to factors beyond Catalyst's ability to
control or estimate precisely. Consequently, there can be no
assurance that the actual results or developments anticipated by
Catalyst will be realized or, even if substantially realized, that
they will have the expected consequences for, or effects on,
Catalyst or HBC and their respective future results and
performance. Forward-looking statements in this press release are
based on Catalyst's beliefs and opinions at the time the statements
are made, and there should be no expectation that these
forward-looking statements will be updated or supplemented as a
result of new information, estimates or opinions, future events or
results or otherwise, and Catalyst disavows and disclaims any
obligation to do so, except as required by applicable law.
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SOURCE The Catalyst Capital Group Inc.