Catalyst buys 18M HBC shares in move to block privatization plan

A Canadian investment firm says it has obtained more than 18 million shares in Hudson’s Bay company, a chunk the investment firm says is big enough to block a plan from the retailer’s management team to take it private.

Catalyst Capital Group Inc. said Monday it has bought 18,491,502 shares in HBC for an average price of $10.11. 

Catalyst has been buying up shares in HBC in an attempt to block a plan announced earlier this summer by members of HBC’s board to take the company private at $9.45 a share.

By offering a higher price, Catalyst was trying to show that the private plan wasn’t valuing the company highly enough. So they offered a higher price both to show how undervalued the first plan was, and to get enough clout in terms of share ownership so that the HBC group, led by executive chairman Richard Baker, wouldn’t be able to complete their deal as planned.

“We are pleased with the result of our offer to HBC shareholders, which gave participating shareholders an immediate premium to both the market price of HBC shares and to the Baker Group’s proposal,” Catalyst’s manager director Gabriel de Alba said.

Catalyst is not the only significant HBC shareholder opposed to the going private plan. Connecticutt-based Land & Buildings Inc. owns more than 11 million shares in the company, a stake of more than six per cent, and they have also also loudly criticized the plan.

“Baker’s attempt to disenfranchise minority shareholders by offering a woefully inadequate price clearly pits him against the minority shareholders,” L&B said in a letter to shareholders earlier this month, one in which they call the Baker offer “woefully inadequate.”

The Baker bid already controls just over half of HBC’s shares as it stands, but based on Catalyst’s successful plan to buy up HBC shares along with opposition from L&B and others who have yet to come forward, the privatization plan as curently constructed may not have enough support to go through.

“Catalyst is committed to working with the Special Committee and the HBC Board to seek out every alternative that can maximize value for all shareholders,” Catalyst said in a release.

Shares in HBC were up 38 cents, or 4.05 per cent, at $9.76 in early trading on the Toronto Stock Exchange.