HBC says share holders were misled Activist investor accused

TORONTO — Hudson’s Bay Co. accused an activist investor of misleading shareholders regarding the sale of the retailer ’s Lord & Taylor Fifth Avenue building and a related i nvestment by Rhone Capital.

In a statement, HBC says it has not sold a controlling interest to Rhone which agreed last month to invest $632 million in the retailer in the form of mandatorily convertible preferred shares, initially convertible into common shares at $12.42 per share.

HBC says it expects 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 30.0 per cent if the preferred shares are held to their eight-year maturity.

In a letter to shareholders Wednesday, Land & Buildings said the HBC board has “essentially agreed to sell a controlling interest in the company through the issuance of a convertible preferred security” without seeking the approval of its minority shareholders.

Land & Buildings released its letter as it urged HBC to consider a bid for its German operations by Signa Holding.

It has pressured management for months and argues that HBC’s stock price is undervalued. Land & Buildings has previously threatened to seek the removal of company directors unless it unlocked the substantial value in its real estate holdings.

The announcement of the investment by Rhone last month was part of a series of deals that also saw HBC sell the Lord & Taylor building in New York to WeWork Property Advisors for C$1.075 billion.