A group of Hudson's Bay Co. shareholders led by HBC Governor Richard Baker on Monday released a list of "compelling reasons" for minority shareholders to support its bid to take the company private for 10.30 Canadian dollars per share in cash ($7.86 when the offer was made). They said that is the "best and final offer" for investors, who, the group said, would also be relieved of the burden of supporting the department store company's ongoing challenges.
The argument follows a report two weeks ago from a special committee of HBC's board stating that, while committee members found the Baker group's bid low, it would nevertheless support it in the absence of any alternative and in light of the company's struggles.
Both the board's special committee and the Baker group also noted that the value of HBC's significant real estate portfolio has declined. The Baker group, referred to in the release as "The HBC Continuing Shareholders," urged investors to vote for its proposal at a special shareholders meeting on Dec. 17.
Several analysts over the years have criticized Baker's leadership of HBC, saying he put too much focus on the company's real estate and not enough on its fundamental retail business.
Doug Stephens, author of "Reengineering Retail: The Future of Selling in a Post-Digital World," is among them. "I've felt that for at least the last 5-6 years HBC has lacked a defined and viable retail strategy," he said in an email to Retail Dive. "The business has revolved around real estate."
Now the company's struggles in both retail and real estate have formed the rationale for Baker's group to take it over.
"If the transaction does not receive support from the Minority Shareholders, all shareholders will face the risks and volatility posed by the difficult retail and retail real estate environment," according to the HBC Continuing Shareholders group. "Further, if HBC were to remain a public company, given the continued challenging environment for retail stocks, the Continuing Shareholders expect HBC's stock price would fall meaningfully, potentially to levels comparable to the price it was trading prior to the announcement of the Continuing Shareholders' initial proposal."
The Baker group also touted the "unanimous recommendation of the Special Committee, determined that the arrangement is in the best interests of HBC and fair to the Minority Shareholders." Their press release didn't mention how the committee came to that conclusion after unsuccessful attempts to boost the bid, however.
After reviewing the company's finances and prospects, among other variables, the special committee in October sought to negotiate with Baker's group to sweeten the deal. Financial advisers to the special committee determined that the fair market value of HBC common shares ranged between $10.00 and $12.25 per share. The $10.30 per share price reflects an increase from the group's initial offer in June of $9.45.
In late October, Canadian private equity firm Catalyst Capital Group had slammed the bid saying it was "nothing more than a severely undervalued share buyback" that reflects Baker's undue influence. Catalyst didn't immediately return Retail Dive's request for comment on the Baker group's public argument Monday.
Stephens sees the turn of events as a likely end for Hudson's Bay, whose origins harken back to the Canadian fur trade that helped the English and French conquer what is now North America.
"I think Baker et al recognize that if a global recession were to ensue as we expect, the value of that real estate itself may be dramatically affected," he said. "Hence, as I see it, the push by Baker to take the company private, liquidate its real estate holdings and fold HBC as we know it."