People walk past the Hudson’s Bay store on Granville and Georgia in Vancouver, on April 1.Isabella Falsetti/The Globe and Mail
A document has been distributed to people involved in the Hudson’s Bay Co. sale process, which strongly suggests a member of the retailer’s management or other insider may be considering a bid for part of the Bay’s operations, assets or leases.
On Thursday, lawyers for the monitor overseeing the process to solicit bids for the company sent out the document, titled Insider Protocol, which has been implemented for both the sale of all or part of the Bay, as well as the monetization of its leases.
The protocol is intended “to ensure the integrity and fairness” of the processes for all participants, “in view of a potential insider bid that may involve certain members of management,” according to the document, which was obtained by The Globe and Mail.
It is not clear which Hudson’s Bay insiders may be considering a bid. Hudson’s Bay governor and executive chairman Richard Baker did not respond to a request for comment on Thursday. The monitor, in its message distributing the document, wrote that there are “no assurances” such a bid will materialize.
Canada’s oldest retailer, struggling with mounting losses in the business and $1.1-billion in debt, was granted court protection from its creditors on Mar. 7 under the Companies’ Creditors Arrangement Act.
Hudson’s Bay has received court approval to solicit possible investment in a restructuring plan for the business, as well as bids to acquire all or part of the company’s operations and assets. It has also launched a process to sell off store leases as it liquidates the vast majority of its department stores across Canada.
While bidders have until April 30 to submit final binding sale proposals and investment proposals for Hudson’s Bay, and until May 1 to submit bids for leases, this week marked a deadline for insiders to disclose their interest in the process.
Hudson’s Bay “and any related person” wishing to submit or participate in a proposal had to declare their intentions to the court monitor and to Reflect Advisors LLC, the financial advisers overseeing the bids, no later than this past Monday.
“No insider bid has been received at this time,” Adam Zalev, Reflect’s co-founder and managing director, wrote in an e-mail to The Globe on Thursday evening.
Multiple parties have already expressed interest in the sale process, according to two sources with knowledge of the process, whom The Globe is not naming because they were speaking about confidential matters.
The protocol specifies that any members of Hudson’s Bay management who are substantively involved with an insider’s bid for the business, property or leases – either in considering such a bid, in negotiations or in submitting the bid – must seek permission from the CCAA monitor, Alvarez & Marsal Canada Inc., before communicating with any potential bidders in the sale or lease monetization process.
The monitor also must oversee any substantive discussions between Reflect and any insiders or affected management, concerning an insider bid. And the monitor must consent to insiders negotiating with landlords or with licensors or licensees of Hudson’s Bay intellectual property and brands.
Hudson’s Bay management who are involved in those talks also cannot have access to any information about the sale or the lease monetization processes, unless that information is provided to all other participants, according to the document.
Those insiders also cannot know who has signed a non-disclosure agreement in order to receive information about Hudson’s Bay – which would identify other parties considering a possible competing bid.
The protocol sets out other limitations as well, including preventing any insiders from incurring costs on Hudson’s Bay accounts related to a potential bid, unless those costs are approved by the CCAA monitor, and are determined to be “for the benefit of the estate as a whole.”
As it seeks a plan for the future, Hudson’s Bay has begun liquidation sales at all but six of its stores across the country – including 74 Hudson’s Bay locations, as well as two Saks Fifth Avenue and 13 Saks Off Fifth stores that the company operates in Canada.
Hudson’s Bay has developed a potential restructuring plan, which would save the six stores left out of the liquidation, as well as its e-commerce operations, according to a confidential information memorandum distributed to potential bidders, which was obtained by The Globe. That plan would require buyers or investors to put $82-million into the operations in the first year, the memo says.