Ontario Securities Commission to review TSX approval in HBC land deal

The Ontario Securities Commission held a hearing Wednesday at the request of a Hudson’s Bay Co. activist investor to review a Toronto Stock Exchange decision concerning shares involved in the sale of a New York City property.

Land & Buildings Investment Management LLC applied on Monday for the regulator to review the TSX’s Nov. 7 decision to provide conditional support to Rhone Capital’s $632-million equity investment in the form of eight-year mandatory convertible preferred shares.

Ontario Securities Commission, HBC, Lord & Taylor, WeWork, TSX
Lord & Taylor Fifth Avenue flagship. Photo by Jim Henderson via Wikimedia Commons

The funding was part of a deal that included the sale of HBC’s (TSX:HBC) Lord & Talyor Fifth Avenue building to WeWork Property Advisors for nearly $1.1 billion and to pursue a strategic alliance with WeWork to pursue future real estate transactions.

The owner of Hudson’s Bay, Saks Fifth Avenue and Lord & Taylor 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 per cent if the preferred shares are held to their eight-year maturity.

HBC said it believes there is no merit to the appeal by Lands & Buildings, given that written consent in support of the equity investment, from shareholders representing more than half of the company’s outstanding common shares, has been provided to HBC and the TSX.

“These shareholders will benefit from, and be affected by, Rhone Capital’s investment in the same manner as all other shareholders of HBC,” the company said in a statement.

Land & Buildings has urged the retailer to consider a bid for its German operations by Signa Holding and criticized HBC for selling a controlling interest in the company without seeking the approval of minority shareholders.

The retailer and its investor have been in a war of words, accusing one another of misleading shareholders regarding the building’s sale and the related Rhone Capital investment.

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