Catalyst Capital seeks Ontario Securities Commission hearing in HBC fight

The Hudson's Bay Company sign in downtown Toronto, Wednesday July 16, 2008. Catalyst Capital Group Inc. is seeking a hearing at the Ontario Securities Commission to block a rival takeover offer for Hudson's Bay Co. by a group led by the retailer's executive chairman. THE CANADIAN PRESS/Adrian Wyld

An investment firm and Canada's oldest retailer will face off at a hearing later this week at the Ontario Securities Commission as the battle to take Hudson's Bay Co. private heats up.

Catalyst Capital Group Inc. said late Monday it filed a notice of application for a hearing with the OSC to block a privatization bid led by HBC executive chairman Richard Baker.

A group of shareholders, including Baker, is offering a buyout priced at $10.30 per share. HBC's board approved the deal after the group bumped their price by 85 cents from $9.45 per share.

"As as substantial minority shareholder, Catalyst requires the OSC's assistance seeking redress for inadequate and inaccurate disclosure, and coercive and unfair practices leading up to and following HBC board approval of the transaction," the investment firm said in a statement.

The OSC scheduled the meeting for Dec. 5.

Spokeswoman Kate Ballotta declined to answer questions about the hearing process in an email.

The OSC can initiate proceedings against companies that are suspected of violating securities law or acting contrary to the public interest. Hearings occur before an administrative tribunal of the commission, and the commission can impose sanctions, including financial penalties and bans on trading.

The Dec. 5 hearing will be the proceeding's first attendance. During it, the panel will impose a timeline for document and other disclosures, and hearing the application — among other things.

If Catalyst cannot have the deal blocked, it wants HBC to amend and redistribute to shareholders its management information circular to address what it says are numerous omissions and misrepresentations. Additionally, HBC should postpone its special meeting of shareholders to vote on the privatization bid, the firm said.

The meeting is scheduled for Dec. 17. The Baker-led deal requires approval by a 75 per cent majority, as well as a majority of the minority shareholders, which excludes those behind the bid and their affiliates.

The Baker-led group, meanwhile, filed a complaint to the OSC, according to a letter it sent Dec. 2 to a special committee of HBC's board, formed to review the initial privatization offer by the Baker group.

Their complaint alleges Catalyst made misleading disclosures about the adequacy of its financing arrangements — among other things.

The OSC could not confirm it had received a complaint.

"As a matter of general policy, we're unable to confirm or comment on the existence, status or nature of any complaint, review or investigation," wrote Ballotta. This policy is intended to protect investigations' integrity, ensure the process isn't used to affect the market and promote fairness to those at the centre of investigations.

Catalyst, HBC and the Baker-led group did not immediately respond to requests for comment.

The escalation to the OSC came after the special committee announced that Catalyst's unsolicited competing proposal "is not reasonably capable of being consummated."

Catalyst has offered $11 per share in cash for HBC, but HBC's special committee said the Baker-led group, which calls itself the continuing shareholders, confirmed to it that they "are not interested in any transaction that would result in a sale of their interests" in the company. They collectively own about 57 per cent of HBC's common shares on an as-converted basis.

The shareholder group said in the Dec. 2 letter that it has "serious concerns" about Catalyst's offer. It said the bid intends to mislead and manipulate, and is not capable of being financed or completed. The letter also calls Catalyst "not a credible counterparty."

Catalyst, which controls about 17.49 per cent of HBC's common shares, has indicated it has enough support from other minority shareholders to vote down the competing privatization offer.

The investment firm and other shareholders that together control a 28.24 per cent stake of the company's common shares plan to vote no, Catalyst said in late October. That represents "a majority of minority shareholders," it said at the time.

HBC's shares closed down 43 cents, or 4.4 per cent, at $9.31 on the Toronto Stock Exchange.

This report by The Canadian Press was first published Dec. 3, 2019.

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