Catalyst Applies for Hearing with Ontario Securities Commission to Review Richard Baker's Transaction with Hudson's Bay Company

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Dec 02, 2019, 23:16 ET

TORONTO, Dec. 2, 2019 /PRNewswire/ - The Catalyst Capital Group Inc., on behalf of investment funds managed by it, ("Catalyst") has filed a notice of application for a hearing with the Ontario Securities Commission (the "OSC") in relation to the October 20, 2019 agreement (the "Arrangement Agreement") between Hudson's Bay Company (TSX: HBC) ("HBC" or the "Company") and certain insiders led by Mr. Richard Baker (the "Baker Group").

Among the orders requested, Catalyst seeks to:

permanently prohibit the Baker Group from acquiring securities of HBC as contemplated under the Arrangement Agreement or any similar transaction;

or, in the alternative,

require HBC to amend and resend to shareholders its Management Information Circular dated November 14, 2019 (the "Circular") to address numerous omissions and misrepresentations,
require HBC to postpone the special meeting of shareholders (the "Meeting") currently scheduled to be held on December 17, 2019 to consider the transactions contemplated by the Arrangement Agreement (the "Transaction") to a date not earlier than 21 calendar days after the date the amended Circular is sent to shareholders of HBC, and
cease trading of the securities of the Company in connection with the Transaction until such time that the Company complies with the order requiring it to amend the Circular and the interim order requiring the postponement of the Meeting.

As a 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. Catalyst is asking that the Transaction be prevented from proceeding or, at a minimum, that the level of disclosure made to the shareholders who are impacted by it be significantly enhanced and shareholders be given sufficient time to review and understand such enhanced disclosure.

Issues Related to the Baker Group Transaction and Conduct

Catalyst's notice of application sets out certain allegations, including:

The Transaction is the result of a deeply flawed process. The proposal announced by the Baker Group on June 10, 2019 to acquire the minority shares of the Company at $9.45 per share (the "Initial Proposal"), and the negotiations among the Baker Group leading up to the making of the Initial Proposal, could only have been made based on material information that was not generally disclosed. The Initial Proposal and related negotiations thus involved breaches of management and director fiduciary duties and related duties of confidence.
In addition, the Baker Group formed a group with the result of negating key aspects of the mandate of the Special Committee that reviewed the Transaction, including the consideration of any alternative transactions available to the Company, and otherwise acted in a coercive manner to undermine the Special Committee.
When finally provided to HBC's shareholders, the Circular contained misrepresentations, both in terms of untrue statements of material facts and omissions of material information. The Company, in breach of Multilateral Instrument 61-101, failed to provide summaries of certain key valuations and appraisals related to the Transaction, including prior valuation work relating to its most material asset (its Saks Fifth Avenue flagship store on Fifth Avenue in New York City).
The Circular also failed to disclose certain benefits that would accrue to the Baker Group and falsely claimed that the Transaction was negotiated on an arm's length basis.

Catalyst is also challenging HBC's reliance on deficient valuations and appraisals in advancing the Transaction.

It is believed that there are material deficiencies in the Circular that must be addressed or corrected. The Circular has been and will be relied on by investors as a primary source of information for their decisions related to the Transaction and Arrangement Agreement. Unless these deficiencies are remedied, it is not possible for shareholders to fully understand the Transaction.

SOURCE Gagnier Communications