Leading Proxy Advisory Firms ISS, Glass Lewis and Egan-Jones All Recommend HBC Shareholders Vote “FOR” Privatization Transaction

Hudson's Bay Company (TSX: HBC) ("HBC" or the “Company”) today announced that proxy advisory firms Institutional Shareholder Services (“ISS”), Glass Lewis, and Egan-Jones have all recommended that HBC shareholders vote “FOR” the transaction in which HBC 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. The Special Meeting of Shareholders (the “Special Meeting”) to approve the transaction will be held at The Arcadian Loft, 8th Floor, 401 Bay Street, Toronto, Ontario, on February 27, 2020 at 10:00 a.m.

The Board of HBC (excluding conflicted directors) recommends that all shareholders vote FOR the privatization transaction at the Special Meeting.

David Leith, Chair of the Special Committee, said, “We are pleased that all three proxy advisory firms have recommended in favor of the privatization transaction. Their positive recommendations are consistent with the Special Committee’s view that this transaction is in the best interests of the Company, is fair to the Minority Shareholders, and provides certain and immediate value at a significant market premium.”

Proxy Advisory Firm Recommendations

In making its recommendation FOR, ISS concluded that:

• The $11.00 in cash per share offer by the Continuing Shareholders “appears to represent the best available alternative for minority shareholders, particularly in light of the risks associated with executing the company's standalone plan in a challenging retail environment.”
• “The quantum of the Consideration to be paid to the Minority Shareholders is the product of extensive negotiations between the Special Committee, the Continuing Shareholders and Catalyst and their respective advisors that resulted in an increase in the purchase price to be paid to the Minority Shareholders from $9.45 per common share under the Initial Proposal to $11.00 per common share.”

In making its recommendation FOR, Glass Lewis concluded that:

• “We believe that the higher price is particularly favorable to [minority] shareholders when viewed in the context of the Company’s deteriorating profitability in recent years and the substantial industry headwinds that the Company continues to face.”
• “In sum, the revised deal offers unaffiliated minority shareholders with a higher exit value for their HBC shares compared to the original deal, while the voting support agreement with Catalyst improves the likelihood of the deal proceeding.”

In recommending a vote FOR the transaction, Egan-Jones noted that:

• “Based on the review of publicly available information on strategic, corporate governance and financial aspects of the proposed transaction, Egan-Jones views the proposed transaction to be a desirable approach in maximizing shareholder value.”
• “After careful consideration, we believe that approval of the merger agreement is in the best interests of the Company and its shareholders and its advantages and opportunities outweigh the risks associated to the transaction.”

Special Meeting of Shareholders on February 27, 2020

Shareholders as of the close of business on the record date of January 27, 2020 are entitled to vote at the Special Meeting. In order for shareholders’ votes to be counted at the Special Meeting, shareholders as of the new record date of January 27, 2020 must recast any votes they may have cast in connection with the special meeting of shareholders that had been scheduled for December 17, 2019.

Each shareholder’s vote is important regardless of the number of shares owned. The Special Committee and the Board (excluding conflicted directors) recommend that Minority Shareholders vote in favor of the transaction in advance of the proxy voting deadline of 10:00 a.m. ET on Tuesday, February 25, 2020. Shareholders with questions about how to vote their shares may contact HBC’s proxy solicitation agent, Kingsdale Advisors, by telephone at 1-866-581-0512 (toll-free) or 1-416-867-2272 (collect) or by email at [email protected].

Materials related to the Special Meeting are available under HBC’s profile on SEDAR at www.sedar.com and on HBC’s website at www.investor.hbc.com. Shareholders can access voting instructions and additional information about the transaction, including the Management Information Circular, by visiting www.HBCGoPrivate.com.

Additional Transaction Information

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. It is strongly suggested that shareholders consult their own tax advisors and read carefully the tax disclosure section of the Management Information Circular.

About HBC

HBC is a diversified retailer focused on driving the performance of high-quality stores and their omni-channel platforms and unlocking the value of real estate holdings. Founded in 1670, HBC is the oldest company in North America. HBC’s portfolio today includes formats ranging from luxury to premium department stores to off price fashion shopping destinations, with nearly 250 stores and approximately 30,000 employees around the world. HBC’s leading businesses across North America include Saks Fifth Avenue, Hudson’s Bay, and Saks OFF 5TH. HBC also has significant investments in real estate joint ventures. It has partnered with Simon Property Group Inc. in the HBS Joint Venture, which owns properties in the United States. In Canada, it has partnered with RioCan Real Estate Investment Trust in the RioCan-HBC Joint Venture.

Forward-Looking Statements

Certain statements made in this news release are forward-looking statements within the meaning of applicable securities laws, including, but not limited to, statements with respect to the rationale of the Special Committee and the Board of Directors for entering into the Arrangement Agreement, as amended, the terms and conditions of the Arrangement Agreement, as amended, the timing of various steps to be completed in connection with the transaction, and other statements that are not material facts. Often but not always, forward-looking statements can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “believe”, “estimate”, “plan”, “could”, “should”, “would”, “outlook”, “forecast”, “anticipate”, “foresee”, “continue” or the negative of these terms or variations of them or similar terminology.

Although HBC believes that the forward-looking statements in this news release are based on information and assumptions that are current, reasonable and complete, these statements are by their nature subject to a number of factors that could cause actual results to differ materially from management’s expectations and plans as set forth in such forward-looking statements, including, without limitation, the following factors, many of which are beyond HBC’s control and the effects of which can be difficult to predict: (a) the possibility that the transaction will not be completed on the terms and conditions, or on the timing, currently contemplated, and that it may not be completed at all, due to a failure to obtain or satisfy, in a timely manner or otherwise, required shareholder and regulatory approvals and other conditions of closing necessary to complete the transaction or for other reasons; (b) risks related to tax matters; (c) the possibility of adverse reactions or changes in business relationships resulting from the announcement or completion of the transaction; (d) risks relating to HBC’s ability to retain and attract key personnel during the interim period; (e) the possibility of litigation relating to the transaction; (f) credit, market, currency, operational, real estate, liquidity and funding risks generally and relating specifically to the transaction, including changes in economic conditions, interest rates or tax rates; (g) risks and uncertainties relating to information management, technology, supply chain, product safety, changes in law, competition, seasonality, commodity price and business; and (h) other risks inherent to the Company’s business and/or factors beyond its control which could have a material adverse effect on the Company or the ability to consummate the transaction.

HBC cautions that the foregoing list of important factors and assumptions is not exhaustive and other factors could also adversely affect its results. For more information on the risks, uncertainties and assumptions that could cause HBC’s actual results to differ from current expectations, please refer to the “Risk Factors” sections of HBC’s Annual Information Form dated May 3, 2019 and Amended and Restated Management Information Circular dated January 30, 2020 as well as HBC’s other public filings, available at www.sedar.com and at www.hbc.com.

The forward-looking statements contained in this news release describe HBC’s expectations at the date of this news release and, accordingly, are subject to change after such date. Except as may be required by applicable Canadian securities laws, HBC does not undertake any obligation to update or revise any forward-looking statements contained in this news release, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on these forward-looking statements.

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