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Sep 6, 2017

Hudson's Bay shares jump after activist shareholder comments

HBC has hired bankers to advise on potential privatization: Land and Buildings

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Hudson's Bay Co activist shareholder Land and Buildings said on Wednesday it believed a highly qualified third-party buyer had "serious interest" in acquiring Galeria Kaufhof, the department store operator's European chain.

Hudson's Bay (HBC.TO) shares jumped more than 8 per cent to close at $12.19 after seesawing throughout the day.

Land and Buildings, headed by activist investor Jonathan Litt and which owns about 5 per cent of HBC stock, said the potential interest could be valued close to $10 a share, a premium to the roughly 2.8 billion euros (US$3.34 billion) HBC paid to acquire the Kaufhof chain in 2015.

Litt has been pressuring HBC, which also owns Lord & Taylor, Saks Fifth Avenue, Gilt and Saks OFF 5TH, to take bold action in extracting value from its real estate and had previously threatened to launch a proxy fight if management did not act.

"Should any indications of interest materialize, we would expect the Board to fully and fairly evaluate any such offers with an eye towards negotiating a transaction," Land and Buildings said in a statement.

The activist investor also said Wednesday it's been informed by other unnamed parties that HBC's board has retained, or is in the process of retaining, J.P. Morgan as a financial advisor to an independent committee of directors.

"If true, this would bolster recent reports that the board is evaluating a potential go-private offer from management," it said.

HBC was not immediately available for comment on Land and Buildings' claims.

Late on Tuesday, HBC posted second-quarter results that missed expectations, as store traffic declined with changing trends and growing competition from online and discount retailers. Its shares tumbled as much as 6.4 per cent on Wednesday shortly after the open.

Executive Chairman Richard Baker told analysts earlier on Wednesday the company remained committed to evaluating real estate opportunities.

Management told analysts third-quarter trends showed many of its store brands were performing better, but Land and Buildings said the results "underscored the urgency for action" and that HBC needed to be more transparent about its plans.

The retailer said the success of its flagship Hudson's Bay store in downtown Toronto and stores elsewhere showed its investments were bearing fruit and that exclusive deals with third-party retailers had helped drive traffic.

Despite the losses and opposition from Litt, the company is rolling out stores in the Netherlands and elsewhere, bucking a trend away from bricks and mortar.

Poor quarterly results have helped drive HBC's shares steadily lower from a record high of just under $30 in mid-2015.