HBC shares up on news of likely takeover deal

Shares in Hudson's Bay Co. jumped nearly 10 per cent in early trading after a deal that appeared to put a months-long battle for the company to rest.

HBC shares climbed 96 cents, or 9.72 per cent, to $10.84 on the Toronto Stock Exchange.

A group led by HBC executive chairman Richard Baker boosted its offer for the retailer to $11 late Friday night, winning the approval of rival shareholder group Catalyst Capital, which had said Baker's earlier bid of $10.30 per share undervalued the company.

Based on the latest offer, HBC's equity would be worth roughly $2 billion, about 11 per cent higher than its recent trading value on the Toronto Stock Exchange.

Catalyst had used various techniques to block the Baker group, including a counter offer of $11 per share and a successful trip to the Ontario Securities Commission, which directed HBC and the Baker group to provide more information before holding a shareholder vote.

That vote is now expected to be held in February. For the Baker group to succeed, it will need to obtain at least 75 per cent of the votes cast by all shareholders and at a simple majority of votes cast by minority shareholders, including Catalyst.

David Leith, chair of the committee considering the offers, said the new price provides minority shareholders with "compelling and immediate" value.

"I would like to commend Catalyst on their constructive approach to getting a transaction agreed which we believe is in the best interests of the company and the minority shareholders," Leith said in a statement.

Agreement is conditional

Despite the overall agreement between the warring factions, there are some conditions that would allow Catalyst to retract its support.

Catalyst said that one condition is that TD Securities Inc. provides a new formal valuation of Hudson's Bay Co. prior to the vote and that "the lower end of the range of the fair market value of the HBC Shares is equal to or less than $11."

The deal also requires HBC to mail and electronically post an amended management circular by Feb. 14 and that language in the circular complies with an OSC order issued Dec. 18.

Friday's announcement comes days after there was an unconfirmed report of a deal that sent HBC shares soaring briefly above $10 on Tuesday. They closed Friday at $9.88 at the Toronto Stock Exchange.