Picture: BLOOMBERG
Picture: BLOOMBERG

New York  — Saks Fifth Avenue parent Hudson’s Bay said on Monday it has agreed to a sweetened offer from a shareholder group led by executive chair Richard Baker to take the struggling Canadian department store chain private.

Baker’s group has offered C$10.30 a share in cash for the 43% of shares it does not own, a premium of about 9% to Friday’s close. Shares were trading below the deal price at $10.05 on Monday morning, indicating that investors so far do not think a higher offer will be made.

The deal must receive support from a majority of shareholders not involved with Baker’s bid, creating a possible complication for it to close. Minority shareholder Land & Buildings, which considers the price inadequate, is opposing the deal, according to a source familiar with the matter.

In June, the group led by Baker, who owns 6.32% stake in the company, had offered C$1.74 billion, or C$9.45 per share, but a special panel of the company said it was “inadequate”.

Hudson’s Bay has been closing underperforming stores to cut costs as it competes with discount stores such as TJX, which have captured cost-conscious younger consumers, and Amazon.com. In August, the company said it would sell its Lord + Taylor department store business for about $100m to sharpen its focus on its key brands.

Hudson’s Bay said the deal gives minority shareholders a compelling value proposition in the deteriorating retail environment.

“Despite the execution of several strategic initiatives, the company’s share price has continued to decline,” the company said.

Shares of the company have gained 30% in 2019 on the news the company may go private. They remain less than half where they stood in 2015 when they hit a high of C$29.52.

David Leith, chair of the special committee of the company’s board, said the group is confident the deal represents “the best path forward for HBC and the Minority Shareholders”. Baker’s consortium includes Rhone Capital, WeWork Property Advisors and others.

Buyout firm Catalyst Capital Group is evaluating Baker’s sweetened offer, a source said. Catalyst had also been opposing Baker’s plans to take the company private, and boosted its stake to roughly 16%.

Reuters