Private equity firm Catalyst Capital Group Inc. disclosed Tuesday that it owns just shy of a 16 per cent stake in Hudson’s Bay Co., more than 50 per cent higher than previously revealed and not far off the 21.5 per cent threshold needed to block a privatization bid by the chairman of the storied Canadian retailer.
Catalyst disclosed its total holding in a regulatory filing after revealing last month that its had purchased a 10.5 per cent stake in HBC for $187 million, or $10.11 a share, through an unsolicited offer to shareholders.
A group led by the retailer’s chairman Richard Baker has offered $9.45 a share to privatize the retailer, a bid that was deemed “woefully inadequate” by activist shareholder Jonathan Litt.
It is unclear how much HBC stock is owned by Litt, whose Land and Buildings Investment Management has been a long-time critic of how Baker is running the company, and whether Catalyst and Litt’s firms have enough shares combined to block the privatization attempt by Baker’s group.
As of last month, Baker’s group controlled 57 per cent of HBC shares, and their bid requires the approval of a majority of the minority – or just over 21.5 per cent – to complete the privatization as offered.
In Tuesday’s regulatory filing, Catalyst called the offer from Baker’s group “inadequate” but said the private equity firm is committed to working with a special committee of HBC’s board of directors “to seek out every alternative that can maximize value for all shareholders.”
This could be accomplished through a sale process, dividend distributions of cash to be realized from the sale of the retailer’s key European assets, or other means, Catalyst said in the filing.
The filing also described Catalyst’s share purchases as being “for investment purposes only and not for the purpose of exercising control or direction over the issuer.”
Nevertheless, Catalyst’s involvement in HBC has prompted speculation about what the private equity player hopes to gain. Some observers have suggested the company is now “in play” and the foothold puts Catalyst in place to extract or benefit from a higher price than the Baker group has offered.
Other company watchers point to the company’s valuable real estate holdings, which could be worth even more if they were developed beyond housing HBC’s chain of stores in shopping districts across Canada and in the United States.
Last month, HBC agreed to sell its struggling Lord & Taylor department store chain to Le Tote for $133 million, but the Canadian company continues to own better-performing Saks Fifth Avenue and Hudson’s Bay stores. The deal with Le Tote allowed HBC to retain the real estate on which the Lord & Taylor stores were located.
Earlier this year, HBC sold Lord & Taylor’s flagship store in Manhattan for $1.1 billion.