Indigo shareholders approve deal to go private

Canadian retailer will go private after shareholders approved $2.50 per share offer

Indigo shareholders approve deal to go private

Indigo Books & Music Inc. shareholders have voted to approve a deal to take the retailer private, as reported by BNN Bloomberg.

Shareholders voted Monday in favour of a $2.50 per share offer from Trilogy Retail Holdings Inc. and Trilogy Investments L.P., which hold a 56 percent stake in Indigo and are owned by Gerald Schwartz, the spouse of Indigo CEO Heather Reisman.

The Trilogy companies originally offered $2.25 per share but raised their bid in April.

“We are pleased with the result of today’s vote and look forward to continuing our work on Indigo’s transformation strategy,” Reisman said in a statement following the vote.

“We remain deeply committed to our customers and to all our stakeholders as we work together to inspire reading and enrich the lives of booklovers across the country.”

Indigo spokesperson Madison Downey said in an email to The Canadian Press that Trilogy would not be commenting on the vote.

For Trilogy's offer to be accepted, it required approval by a two-thirds majority vote of Indigo shareholders and a simple majority vote by shareholders not linked to Trilogy and its affiliates.

Some 95.09 percent of votes from shareholders represented at the meeting were in favour of accepting the deal. Just shy of 83 percent of votes from shareholders not linked to Trilogy and affiliates supported the offer.

The privatization allows Indigo to avoid scrutiny as it works to restore profitability and growth.

“The rationale is not to be saddled with public reporting responsibilities because Indigo has been through a lot,” said Richard Leblanc, a professor of governance, law, and ethics at York University in Toronto, in February when the Trilogy firms made their offer.

Indigo faces significant challenges. It is still recovering from a cyber-attack that downed its website for an extended period last year, a series of quarterly losses leading to a January layoff, and board turmoil with four of ten members departing last year.

One board member cited mistreatment and “a loss of confidence in board leadership.” Reisman, who retired amid the turmoil, returned within months to lead Indigo again.

These issues have emerged as inflation and high interest rates cause many Canadians to be cautious with their spending, especially on discretionary items that Indigo sells. This trend was notable during the holiday season when Indigo overbought merchandise that customers were not seeking.

“Despite all their best efforts, they are not doing well,” said Kai Li, the Canada Research Chair in corporate governance at the University of British Columbia, in February. “They are bleeding cash.”

To address these issues, Indigo has been implementing a transformation plan since at least November. Specifics have been limited, but Reisman, who founded the chain in 1996, has said the plan aims to “return Indigo to both growth and profitability.”

Changes include removing wellness products and American Girl dolls from some stores, replacing Starbucks with Columbus Café & Co., bringing back digital inventory search kiosks, and adding more seating and programming more events in stores.

Given these challenges, privatization “may be the shakeup Indigo needs,” said Liza Amlani, principal, and founder of the Retail Strategy Group consulting firm, in an email.

“[Reisman] has a very clear point of view and she has a way of doing things. Now she has the literal manpower to do as she wishes, with her husband at the helm of Trilogy.”

Trilogy hasn’t detailed its plans for Indigo beyond taking the company private, but the money offered reflected a 69 percent premium on the share price of $1.48 when Trilogy first made its bid. Indigo's share price sat at $2.48 ahead of the Monday vote.

The offer had the support of a special committee of independent directors formed by Indigo to assess the deal. Leading independent proxy advisory firms Institutional Shareholder Services and Glass Lewis also recommended shareholders approve the deal.

Now that it has shareholder approval, Indigo said it will seek a final order from the Ontario Superior Court of Justice on Thursday and expects the deal to take effect on Friday. The company anticipates its shares will be delisted from the Toronto Stock Exchange shortly after.