HBC accuses Land & Buildings of misleading shareholders about Rhone investment

TORONTO – Hudson’s Bay Co. and activist investor Land & Buildings continue to accuse one another of misleading shareholders regarding the sale of the retailer’s Lord & Taylor Fifth Avenue building and a related investment by Rhone Capital.

In a statement, HBC (TSX:HBC) said 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 said 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.

The department store chain’s statement is a response to the activist investor’s urging that the retailer consider a bid for its German operations by Signa Holding and critique of the security issuance, which it said sells a controlling interest in the company without having sought the approval of minority shareholders.

Land & Buildings called some of HBC’s comments “highly perplexing” in a statement released today and re-iterated its demand that shareholders be allowed to vote on the share issue. Such a vote is necessary to determine whether the new investment is in common shareholders’ interests.

“The Rhone transaction effectively transfers meaningful and practical control of the company into a class of preferred shares that over time functionally outstrip common shareholders of their equity,” Land & Buildings said.

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.