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Hudson's Bay calls ISS recommendation against take-private plan 'flawed'

Hudson's Bay Co. has dismissed a report by proxy adviser group Institutional Shareholder Services advising shareholders to oppose the retailer's take-private deal led by Executive Chairman Richard Baker.

"We are disappointed by the ISS recommendation and the errors and flawed rationale of ISS. The C$10.30 per share cash offer is in the best interests of HBC and fair to minority shareholders," David Leith, chairman of Hudson's Bay's special committee, said in a Dec. 9 release.

The Canadian department store operator said it identified two "primary flaws" in the ISS report. It said the adviser misunderstood the special committee's determination to waive the standstill obligation of one of the continuing shareholders as well as the effect of the superior proposal construct.

ISS said in its earlier note that there was "no legitimate rationale from a governance perspective for recommending shareholders accept a lower offer."

The "lower offer" that ISS referred to was the take-private bid made by a group of Hudson's Bay shareholders, including Baker, holding 57% of the company. Hudson's Bay accepted the proposal after the shareholder group raised the offer to C$10.30 per share from C$9.45.

Canadian private equity firm Catalyst Capital Group, which owns 17.5% of the company, challenged the offer. Catalyst offered to buy Hudson's Bay for C$11 per share in an all-cash transaction. However, Hudson's Bay rejected it, saying it was "not reasonably capable of being consummated" due to the opposition of the other shareholder group.

Hudson's Bay said its special committee continues to urge all shareholders to vote for the deal with the Baker group after failing to find any alternatives that were more attractive than the proposed transaction.

Hudson's Bay's stock closed down 0.99% to C$9.04 in Toronto on Dec. 9.