HBC reaches agreement with activist investor

Hudson’s Bay Co. says it has reached an agreement with an activist investor to drop its opposition to an investment in the retailer by private equity firm Rhone Capital.

Land & Buildings Investment Management LLC had applied last month to have the Ontario Securities Commission review a Toronto Stock Exchange decision to conditionally approve the investment.

Under the deal, HBC said Friday if it needs to raise money by issuing equity that will trigger the one-year price protection feature of the preferred shares being acquired by Rhone, then it will be done through a rights offering to all of its shareholders on a pro- rata basis, as opposed to a private placement.

Land & Buildings has also agreed to a standstill for a period extending through HBC’s 2018 annual meeting.

Rhone Capital has agreed to invest roughly $ 632 million in HBC in the form of eight- year mandatory convertible preferred shares.

The investment was announced as part of a deal that will see HBC to sell its Lord & Taylor Fifth Avenue building to We Work Property Advisors, a joint venture between We Work and Rhone, f or nearly $ 1.1 billion, and pursue a strategic alliance with We Work regarding future real estate transactions.

Rhone will initially hold a 21.8 per cent voting and equity interest in the company on a partially diluted basis and that could grow to 30 per cent if the preferred shares are held to their eightyear maturity.

HBC and Land & Buildings have been in a war of words in recent weeks, accusing one another of misleading shareholders regarding the building’s sale and the related Rhone investment.

HBC now expects to close the Rhone investment next week.