Hudson’s Bay Company (TSX: HBC) (“HBC” or the “Company”) announced it has filed an Amended and Restated Management Information Circular (the “Circular”) in connection with the special meeting of shareholders (the “Special Meeting”) to be held at The Arcadian Loft, 8th Floor, 401 Bay Street, Toronto, Ontario, on February 27, 2020.
By Luxus Plus
In order for votes to be counted, shareholders as of the new record date of January 27, 2020 must recast any votes cast in connection with the special meeting of shareholders that had been scheduled for December 17, 2019.
The purpose of the Special Meeting is to obtain shareholder approval of a transaction in which Hudson’s Bay Company will become a private company, owned by certain continuing shareholders (the “Continuing Shareholders”), and the Company’s other shareholders (the “Minority Shareholders”) will receive $11.00 per share in cash.
HBC announced on January 3, 2020 that it had entered into an amended agreement with the Continuing Shareholders pursuant to which the Minority Shareholders will receive $11.00 per share in cash in the transaction. The amended purchase price of $11.00 per share in cash represents a 73% premium to the closing price of the Company’s shares immediately prior to June 10, 2019, the date of the initial privatization proposal from the Continuing Shareholders o tym.
Following a comprehensive review and negotiation process by a special committee of independent directors (the “Special Committee”), and after careful consideration of an updated valuation and fairness opinion of TD Securities Inc. (which determined that, as of January 27, 2020 and subject to the assumptions, limitations and qualifications set forth therein, the fair market value of the common shares is in the range of $9.75 to $12.00 per share) and updated fairness opinions of J.P. Morgan and Centerview Partners LLC, and various other factors described in the Circular, the Special Committee and the Board (excluding conflicted directors) have determined that the transaction is in the best interests of the Company and recommend that Minority Shareholders vote FOR the transaction.
The transaction is structured as a purchase for cancellation of common shares by HBC. As a result, a shareholder will be deemed to receive a dividend to the extent that the repurchase price exceeds the “paid-up capital” (“PUC”) of the shareholder’s common shares. The amount of this deemed dividend may differ significantly from the shareholder’s economic gain.
HBC’s current estimate is that PUC is approximately $7.26 per common share. A shareholder who holds their shares as capital property for Canadian income tax purposes may also realize a capital gain (or a capital loss) to the extent that the purchase price received, net of any deemed dividend, exceeds (or is exceeded by) the aggregate of the adjusted cost base of the shareholder’s common shares and any reasonable costs of disposition.
The Canadian federal income tax rate applicable to the receipt of a deemed dividend by a shareholder resident in Canada may be higher than the rate that would apply to a capital gain.
Shareholders who are not residents of Canada generally will not be subject to Canadian federal income tax on capital gains realized on disposition of their common shares, but will be subject to Canadian withholding tax at a rate of 25% (subject to reduction under an applicable treaty) on any deemed dividend arising from the purchase for cancellation.
As a result, shareholders may prefer to sell their common shares in the public markets with a settlement date that is prior to the completion of the transaction. Hudson’s Bay Company strongly suggested that shareholders consult their own tax advisors and read carefully the tax disclosure section of the Circular.
A copy of the Circular and related proxy materials may be found under the Company’s profile on SEDAR at www.sedar.com and on HBC’s website at http://investor.hbc.com/investor-relations. The Company intends to mail the Circular to its shareholders in the upcoming days.
