Glass Lewis & Co. urged investors in the owner of Saks Fifth Avenue to support the transaction at a shareholder meeting December 17. It argued that there’s no viable alternative deal on the table given that Baker’s group, which owns roughly 57 percent of the company, said it won’t sell its shares to anyone else.
While some shareholders may be holding out for the Baker group to reverse its stance and sell at a higher price, Glass Lewis said that appeared unlikely. In the absence of other viable options, the advisory firm said, Hudson’s Bay’s stock would probably fall further in the face of a challenging retail environment if the deal fails.
Catalyst Capital Group Inc., which owns a 17.5 percent stake in the company, has come out against the deal and offered a counter-proposal to acquire Hudson’s Bay for C$11 a share, or roughly $2 billion, a 7 percent premium on the Baker group’s bid. The retailer has rejected the proposal from the private equity firm, arguing it is not viable because the Baker group has said it will not sell to another buyer.
“We simply see no viable path for the Catalyst proposal to achieve any of the requisite shareholder vote hurdles at this time,” Glass Lewis said in a report dated Tuesday. “Therefore, we believe it would be nonsensical for the board to terminate the arrangement agreement.”
Representatives for Hudson’s Bay and Catalyst were not immediately available for comment.
Catalyst has filed a complaint with the Ontario Securities Commission seeking to block the Baker group’s takeover, which will be heard Wednesday in Toronto. Another investor, Ortelius Advisors, which said it owns a 0.5 percent stake in Hudson’s Bay, has also filed a lawsuit to block the deal.
Glass Lewis’s conclusion puts it at odds with another prominent advisor, Institutional Shareholder Services Inc., which last week urged investors to reject the deal. ISS argued that the company offered no clear reason shareholders should accept it when Catalyst has proposed a higher price. Given the defects identified in the sales process, investors could not be confident they are receiving maximal available value for their shares, ISS said.
A third shareholder advisory firm, Egan-Jones Proxy Services, has also supported the deal.
Shares in Hudson’s Bay closed at C$8.78 in Toronto on Tuesday. That’s well below the offer price of C$10.30 a share from the Baker group, as investors fear the deal won’t win the necessary support from a majority of minority holders.
By Scott Deveau; editors: Liana Baker and Eric Pfanner.