HBC activist shareholder calls go-private offer 'woefully inadequate'

An activist shareholder has slammed the proposed offer from a group of majority shareholders to take Hudson’s Bay Co. private, calling the bid “woefully inadequate.”

Activist investor Land & Buildings Investment Management LLC released an open letter Tuesday calling on the special committee reviewing the go-private offer to explore other potential transactions that could “maximize value for all shareholders.”

The letter points to a statement made by HBC chief executive Helena Foulkes last year that pegged the value of the company’s real estate at $28 per share – well above the go-private offer of $9.45 per share.

“We want to be clear: this offer materially undervalues the exceptional assets the company owns,” the letter, signed by Land & Buildings founder Jonathan Litt, said.

“We trust that you, the Special Committee, will fully and fairly evaluate the proposal and thus will ultimately agree that it is woefully inadequate.”

Last week, HBC announced that it was reviewing an offer from a majority group of shareholders, led by executive chairman Richard Baker, to take the company private at $9.45 per share. Shares of HBC have jumped since that offer was made public, closing on Monday at $10.25. The stock fell 2 per cent on Tuesday to $10.04 as of 11 a.m. ET.

Litt said in the letter that the company should explore “a robust strategic alternatives process” that could capitalize on the HBC’s real estate portfolio, which he has previously said has been egregiously undervalued. He also urged the company to hire “a truly independent investment bank” to evaluate the value of the real estate portfolio.

Litt also took issue with the offer being 100 per cent paid for from proceeds from a sale of company assets. The Canadian retailer announced last week it would exit the German market, selling the company’s remaining 49.9 per cent stake of its European real estate joint venture in Germany to its partner, Signa, for US$1.5 billion.

“The Management Buyout Group is not investing any capital to fund the purchase of HBC. In fact, the Management Buyout Group will have excess proceeds from the sale of the European joint venture stake of $773 million, which they could immediately distribute to themselves,” Litt wrote.

“Based on our calculations, the Management Buyout Group could apply the entire $1.5 billion to buy out the minority shareholders at $18 per share, nearly twice the amount of the current offer, and retain ownership of all the remaining assets of the company.”

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