Proxy advisory Glass Lewis recommends HBC shareholders support CEO-led take over bid

A proxy advisory firm is recommending that Hudson's Bay Co. (HBC) shareholders accept a takeover offer by a group led by the retailer's executive chairman, a position that contrasts with a rejection issued earlier by another advisory firm.

Glass Lewis said the proposal offers shareholders certainty of value for their HBC shares at a sizable market premium and a relatively attractive valuation.

A group led by HBC CEO Richard Baker has offered $10.30 per share, a bid that is less than the $11 per share offered by dissident shareholder Catalyst Capital Group.

Glass Lewis said some shareholders may be holding out for the possibility that the group led by Baker might eventually back an alternative offer, but said there was "no compelling evidence" that might happen.

"Thus, in the absence of the proposed transaction contemplated under the arrangement agreement, we believe it is reasonable to expect that the company's share price would experience a substantial decline in value in the immediate term, with any future price recovery subject to further material uncertainty," the firm said.

The recommendation by Glass Lewis comes ahead of a hearing at the Ontario Securities Commission on Wednesday.

Catalyst has asked a regulator to block the privatization bid or, at least, require HBC to amend its information circular.

A special committee of the HBC board formed to review the proposals has rejected the Catalyst offer because the Baker-led group, which holds a controlling stake in the retailer, has said it has no interest in selling.

'No viable path' for rival offer

Glass Lewis said it sees no viable path for a rival offer by Catalyst Capital Group to win shareholder approval.

Proxy adviser Egan-Jones has also recommended that shareholders vote for the transaction, arguing it was a desirable approach to maximizing shareholder value.

David Leith, chair of HBC's special committee, said the support of the proxy advisers demonstrates the Baker-led offer is fair to the minority shareholders.

We continue to maintain our superior offer and believe there are other alternatives to maximize shareholder value.- Gabriel de Alba, Catalyst Capital Group managing director

"Their recommendations also reinforce the comprehensive nature of the special committee's evaluation, including consideration of the applicable risks, opportunities and alternatives available, as well as an acknowledgment of our efforts, including extensive negotiations to maximize value for our shareholders," Leith said in a statement.

However, the recommendations to accept the offer stand in contrast to one issued Monday by Institutional Shareholder Services Inc., which has recommended shareholders reject the offer by the Baker group.

ISS raised several concerns about the sale process, including around disclosures and the ability for the special committee to consider other proposals.

Gabriel de Alba, managing director and a partner at Catalyst, said Glass Lewis ignored all of the issues related to the creation of the Baker Group and buys into the threat that the take under proposed by that group is the only option.

"ISS recognized these issues and called out the HBC board and the insider group," de Alba said in a statement.

"We continue to maintain our superior offer and believe there are other alternatives to maximize shareholder value. If the Board will not act in the best interest of all shareholders, Catalyst is prepared to seek Board change to ensure that the interests of minority shareholders are protected."