- Letter outlines crucial steps for Special Committee to take in order to ensure that minority shareholders' interests are protected
- Highlights that HBC is worth a significant premium to the price of the non-binding proposal to minority shareholders
TORONTO, Oct. 02, 2019 (GLOBE NEWSWIRE) -- Paradise Developments, a long-term shareholder of HBC (the “Company”)(TSX:HBC) today announced that it has delivered a letter to the Special Committee of the Company's Board of Directors related to the non-binding proposal by a group of HBC shareholders to take the company private at $9.45 per share. The full text of the body of the letter follows below.
Dear Special Committee Members:
We understand that you are currently evaluating the privatization of the Hudson’s Bay Company (the “Company” or “HBC”) at a price of $9.45 per share in cash (the “Insider Offer”) from a group of HBC shareholders including individuals and entities related to, or affiliated with, Richard A. Baker, Governor and Executive Chairman of HBC; Rhône Capital L.L.C.; WeWork Property Advisors; Hanover Investments (Luxembourg) S.A.; and Abrams Capital Management, L.P., (collectively called the “Continuing Shareholders”). The group disclosed that they collectively own approximately 57% of the outstanding common shares of HBC on an as-converted basis. In doing so, we trust that you will take seriously your duty of care and your obligation to protect the interests of minority shareholders under Multilateral Instrument 61-101 (“MI 61-101”). We urge you to take the following steps to ensure that minority shareholders receive fair value for their investment:
1. Have J.P. Morgan Securities as financial advisor, Centerview Partners LLC as special advisor (collectively the “Advisors”) prepare or obtain an appraisal of the Company’s owned real estate, and
2. Ensure that Advisors’ valuation of the Company incorporates the imminent and material value and benefits which can be realized through development, joint ventures and potential spin-off of the real estate assets of the Company, whereby ALL shareholders can realize the maximum value they are entitled to.
As board members of the Company, we trust that you are aware of HBC’s significant real estate value as well as the substantial incremental value that can be realized through appropriate corporate actions. We fully expect that you will factor such actions into your assessment of the Company’s valuation and of the fairness of the Insider Offer. As this letter demonstrates, it is our opinion that once these factors are taken into account, HBC is worth a significant premium to the price of the Insider Offer.
By way of background, Paradise Developments through its wholly owned subsidiaries holds 1,200,000 common shares of HBC, and has been a shareholder since August 2019. We are long-term, patient investors who seek to support talented management teams and boards as they create value for ALL shareholders. We believe that HBC’s shares trade at a significant discount to their intrinsic value and offer substantial upside potential at current prices. If we are to be deprived of the opportunity to participate in this upside due a takeover of the Company, then we, and indeed all minority shareholders, have a right to be adequately compensated by receiving a fair price for our shares. By valuing minority shareholders’ investment at significant discount of fair value, the Insider Offer is clearly inadequate in our view.
Should the Continuing Shareholders elect to not entertain a transaction involving the sale of HBC to a party other than themselves, this will restrict your ability to conduct a broad sale process to maximize shareholder value, it does not compel you to accept or recommend an offer that is clearly unfair to minority shareholders. Instead, you should negotiate a better price or recommend that the Insider Offer be rejected.
HBC’s Real Estate Alone is Worth More than the Insider Offer.
As you no doubt are aware, HBC’s owned real estate is incredibly valuable relative to its current market cap and enterprise value. At $9.45 per share, the Insider Offer doesn’t come close to cover the value of HBC’s real estate and any of its upside potential, which may be realized through development, joint ventures and spin-off scenarios. Therefore, we fail to see how the Insider Offer can be viewed as being anywhere close to fair value. We urge you to have the Advisers prepare or otherwise obtain an appraisal of HBC’s owned real estate.
In conclusion, it is incumbent on you, in discharging your duty of care and your obligation to protect minority shareholders under MI 61-101, to ensure that the Advisers valuation of HBC includes an assessment of the market value of its real estate. Once the Company is properly valued, it is clear that the Insider Offer does not even come close to providing fair value to minority shareholders. Therefore, we urge you to either negotiate a fair price or to recommend that the Insider Offer be rejected.
About Paradise Developments
Paradise Developments is a private equity investment and real estate development company based in Toronto, Canada. The Company is the result of a legacy of investments and developments dating back to 1972, including direct equity investments in land, operating businesses, land development, and residential and commercial master planned communities. The Company’s private equity investment objective is growth of net worth value through the long term capital appreciation of assets and the long term growth of predictable cash flow.
For further information:
Steven Weisz
Principal, Executive Vice President
Paradise Developments
416.756.1972 extension: 320
steven@paradisedevelopments.com