Exclusive: Hudson’s Bay Co’s take-private deal falls short in shareholder vote – sources

(Reuters) – Saks Fifth Avenue owner Hudson’s Bay Co (HBC.TO) has fallen short of securing enough shareholder support for a C$1.9 billion($1.4 billion) deal to take the department store operator private, people familiar with the matter said on Friday.

A buyout consortium of Hudson’s Bay investors led by its Executive Chairman Richard Baker did not win enough votes from other company shareholders by a Friday morning deadline for the deal to go through, the sources said.

The development is a blow to Baker, who has argued that Hudson’s Bay would be better positioned as a privately held company to face the brick-and-mortar retail sector’s challenges, shielded from the demands and concerns of stock market investors amid the rising popularity of online shopping.

While Baker’s offer would pay Hudson’s Bay shareholders a 62% premium to the value of their stock prior to his bid being announced, it values the company at just a third of its 2015 worth. That has triggered opposition from some Hudson’s Bay investors, including Canadian private equity firm Catalyst Capital Group Inc and hedge fund Ortelius Advisors LP.

The exact vote tally could not be learned. The sources cautioned that shareholders are allowed to change their mind through Dec. 17, when a special meeting of shareholders is planned.

The sources asked not to be identified because the matter is confidential. Representatives of Hudson’s Bay and Baker’s consortium did not immediately respond to requests for comment.

The buyout consortium has 57% voting control over the company, but a majority of the shareholders not involved with Baker’s consortium must approve the offer for the deal to be completed.

Catalyst, which owns roughly 17.5% of the retailer, made an offer of C$11.00 per share for Hudson’s Bay that a special board committee negotiating on behalf of the company rejected, because Baker’s consortium said it was not willing to allow the sale of the company to another party.

The buyout consortium’s next steps were not immediately clear.

Hudson’s Bay’s agreement to sell itself to Baker’s consortium is for C$10.30 per share. An independent valuation report by real estate services firms CBRE Group Inc and Cushman & Wakefield Plc valued Hudson’s Bay real estate at $C8.75 per diluted share, helping Baker’s push to convince the special board committee to a deal closer to his offer.

Hudson’s Bay shares ended trading up 2.7% at C$8.88 in Toronto on Friday.

The Ontario Securities Commission has held hearings this week on a petition by Catalyst to block the deal and to request more information on it. The Canadian regulator has yet to make a decision on Catalyst’s complaint.