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Hudson's Bay, Land & Buildings reach deal on Rhône Capital investment

Hudson's Bay Co. has reached an agreement with activist investor Land & Buildings Investment Management LLC concerning Rhône Capital's proposed investment in the Canadian retailer, Hudson's Bay said Dec. 1.

Land & Buildings had made an appeal to the Toronto Stock Exchange's decision to conditionally approve Rhône's investment. Hudson's Bay said the activist investor has agreed to withdraw its appeal. The equity investment, which is $500 million from Rhône Capital and is part of a larger set of transactions, including the sale of Hudson's Bay subsidiary Lord & Taylor flagship store on Fifth Avenue in New York City for $850 million, is expected to close around Dec. 6, Hudson's Bay said.

Hudson's Bay said it received conditional approval of the investment in the form of eight-year mandatory convertible preferred shares Nov. 7. On Nov. 16, the company said it saw "no merit" in the Land & Buildings appeal. On Nov. 27, Hudson's Bay said shareholders representing nearly two-thirds of its shares supported the investment. Previously, Land & Buildings has lobbied for the department store operator to go private, sell divisions of its business or monetize its real estate holdings.

As part of the agreement with Land & Buildings, Hudson's Bay has agreed to issue a prospectus or other rights offering to all of its shareholders on a pro rata basis if the company determines to issue equity in a transaction that triggers a "one-year price protection feature." Hudson's Bay said it "does not anticipate the price protection provisions will be triggered."

Land & Buildings has agreed to limit the amount of Hudson's Bay shares it buys through the department store chain's 2018 shareholder meeting, Hudson's Bay said. In June, Land & Buildings said it owned 4.3% of the company.