Hudson’s Bay Company (TSX: HBC) (“HBC” or the “Company”) today
announced that it has received the updated valuation it had
requested from its independent valuator, TD Securities Inc. (“TD
Securities”), as well as new fairness opinions provided by J.P.
Morgan, Centerview Partners LLC (“Centerview Partners”) and TD
Securities. Accordingly, the Special Committee (the “Special
Committee”) of the HBC Board of Directors (the “Board”) has
reaffirmed its unanimous recommendation to the Board that the
privatization transaction with a group of existing shareholders
(the “Continuing Shareholders”) is in the best interests of the
Company and fair to the Company’s other shareholders (the “Minority
Shareholders”). The Board (excluding conflicted directors)
recommends that Minority Shareholders vote in favour of the
transaction at the special meeting of shareholders to be held on
February 27, 2020 to approve the transaction.
On January 3, 2020, the Company announced that it had entered
into an amending agreement to its Arrangement Agreement dated
October 20, 2019 with Rupert Acquisition LLC pursuant to which,
subject to certain conditions, the Company will be taken private by
the Continuing Shareholders and the Minority Shareholders will
receive increased consideration of $11.00 in cash per common share.
It also announced on that date that HBC and the Continuing
Shareholders had entered into a voting and support agreement with
The Catalyst Capital Group Inc. (“Catalyst”) under which Catalyst
agreed to vote the 32,236,878 common shares it controls in favour
of the transaction.
In view of the increased consideration payable to Minority
Shareholders, the Company’s operating results since October 20,
2019 (during which period revenues have been lower than
anticipated) and the period of time since the issuance of the
independent valuation originally provided by TD Securities in
connection with the transaction, the Special Committee requested
that TD Securities prepare an updated independent valuation and
fairness opinion. The Special Committee also requested new fairness
opinions from its financial advisors, J.P. Morgan and Centerview
Partners, in respect of the increased consideration payable to
Minority Shareholders.
The updated formal valuation provided by TD Securities to the
Special Committee determined that, as of January 27, 2020, and
subject to the assumptions, limitations and qualifications to be
set out in TD Securities’ written valuation report, the fair market
value of the common shares of HBC ranged between $9.75 and $12.00
per common share. TD Securities has also provided an opinion to the
Special Committee that, as of January 27, 2020, and subject to the
assumptions, limitations and qualifications to be set out in TD
Securities’ written fairness opinion, the consideration to be
received by the common shareholders of HBC other than the
Continuing Shareholders is fair, from a financial point of view, to
such shareholders.
The TD Securities valuation and fairness opinion, as well as new
fairness opinions that have been provided to the Special Committee
and the Board by J.P. Morgan and Centerview Partners, will be
included in the amended and restated management information
circular that will be mailed to shareholders in advance of the
special meeting of shareholders and filed at www.sedar.com.
The transaction requires the approval at the special meeting of
(i) at least 75% of the votes cast by shareholders, and (ii) a
simple majority of the votes cast by common shareholders, excluding
for this purpose votes attached to common shares required to be
excluded pursuant to Multilateral Instrument 61-101 - Protection of
Minority Security Holders in Special Transactions. Votes cast by
Catalyst will be included in determining whether approval of the
transaction has been obtained under both tests.
The record date for the February 27, 2020 shareholders meeting
is January 27, 2020, with the result that all shareholders as of
the close of business on January 27, 2020 are entitled to vote at
the meeting. In order for shareholders’ votes to be counted at the
meeting, shareholders must recast any votes they may have cast in
connection with the meeting of shareholders that had been scheduled
for December 17, 2019.
The transaction is structured as a purchase for cancellation of
common shares by HBC. As a result, a shareholder will be deemed to
receive a dividend to the extent that the repurchase price exceeds
the “paid-up capital” (“PUC”) of the shareholder’s common shares.
The amount of this deemed dividend may differ significantly from
the shareholder’s economic gain. HBC’s current estimate is that PUC
is approximately $7.26 per common share. A shareholder who holds
their shares as capital property for Canadian income tax purposes
may also realize a capital gain (or a capital loss) to the extent
that the purchase price received, net of any deemed dividend,
exceeds (or is exceeded by) the aggregate of the adjusted cost base
of the shareholder’s common shares and any reasonable costs of
disposition.
The Canadian federal income tax rate applicable to the receipt
of a deemed dividend by a shareholder resident in Canada may be
higher than the rate that would apply to a capital gain.
Shareholders who are not residents of Canada generally will not be
subject to Canadian federal income tax on capital gains realized on
disposition of their common shares, but will be subject to Canadian
withholding tax at a rate of 25% (subject to reduction under an
applicable treaty) on any deemed dividend arising from the purchase
for cancellation. As a result, shareholders may prefer to sell
their common shares in the public markets with a settlement date
that is prior to the completion of the transaction. It is strongly
suggested that shareholders consult their own tax advisors and read
carefully the tax disclosure section of the information circular
relating to the transaction when it is available.
About HBC
HBC is a diversified retailer focused on driving the performance
of high-quality stores and their omni-channel platforms and
unlocking the value of real estate holdings. Founded in 1670, HBC
is the oldest company in North America. HBC’s portfolio today
includes formats ranging from luxury to premium department stores
to off price fashion shopping destinations, with nearly 250 stores
and approximately 30,000 employees around the world. HBC’s leading
businesses across North America include Saks Fifth Avenue, Hudson’s
Bay, and Saks OFF 5TH. HBC also has significant investments in real
estate joint ventures. It has partnered with Simon Property Group
Inc. in the HBS Joint Venture, which owns properties in the United
States. In Canada, it has partnered with RioCan Real Estate
Investment Trust in the RioCan-HBC Joint Venture.
Forward-Looking Statements
Certain statements made in this news release are forward-looking
statements within the meaning of applicable securities laws. Often
but not always, forward-looking statements can be identified by the
use of forward-looking terminology such as “may”, “will”, “expect”,
“believe”, “estimate”, “plan”, “could”, “should”, “would”,
“outlook”, “forecast”, “anticipate”, “foresee”, “continue” or the
negative of these terms or variations of them or similar
terminology.
Although HBC believes that the forward-looking statements in
this news release are based on information and assumptions that are
current, reasonable and complete, these statements are by their
nature subject to a number of factors that could cause actual
results to differ materially from management’s expectations and
plans as set forth in such forward-looking statements, including,
without limitation, the following factors, many of which are beyond
HBC’s control and the effects of which can be difficult to predict:
(a) the possibility that the transaction will not be completed on
the terms and conditions, or on the timing, proposed, and that it
may not be completed at all, due to a failure to obtain or satisfy,
in a timely manner or otherwise, required shareholder and
regulatory approvals and other conditions of closing necessary to
complete the transaction or for other reasons; (b) risks related to
tax matters; (c) the possibility of adverse reactions or changes in
business relationships resulting from the announcement or
completion of the transaction; (d) risks relating to HBC’s ability
to retain and attract key personnel during the interim period; (e)
the possibility of litigation relating to the transaction; (f)
credit, market, currency, operational, real estate, liquidity and
funding risks generally and relating specifically to the
transaction, including changes in economic conditions, interest
rates or tax rates; (g) risks and uncertainties relating to
information management, technology, supply chain, product safety,
changes in law, competition, seasonality, commodity price and
business; and (h) other risks inherent to the Company’s business
and/or factors beyond its control which could have a material
adverse effect on the Company or the ability to consummate the
transaction.
HBC cautions that the foregoing list of important factors and
assumptions is not exhaustive and other factors could also
adversely affect its results. For more information on the risks,
uncertainties and assumptions that could cause HBC’s actual results
to differ from current expectations, please refer to the “Risk
Factors” sections of HBC’s Annual Information Form dated May 3,
2019 and Amended and Restated Management Information Circular to be
filed in connection with the transaction, as well as HBC’s other
public filings, available at www.sedar.com and at www.hbc.com.
The forward-looking statements contained in this news release
describe HBC’s expectations at the date of this news release and,
accordingly, are subject to change after such date. Except as may
be required by applicable Canadian securities laws, HBC does not
undertake any obligation to update or revise any forward-looking
statements contained in this news release, whether as a result of
new information, future events or otherwise. Readers are cautioned
not to place undue reliance on these forward-looking
statements.
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version on businesswire.com: https://www.businesswire.com/news/home/20200127005733/en/
Investor Relations: Jennifer Bewley, 646-802-4631
jennifer.bewley@hbc.com
Media: Special Committee Sard Verbinnen & Co
Liz Zale/Paul Scarpetta, 212-687-8080 Meghan Gavigan,
415-618-8750
Company Nicole Schoenberg, 332-323-9971 press@hbc.com