Indigo Books & Music shareholders vote to approve the privatization sale

TORONTO — Shareholders of Indigo Books & Music Inc. voted to approve a deal that will take the retailer private.

Shareholders on Monday voted in favor of a $2.50 per share offer from Trilogy Retail Holdings Inc. and Trilogy Investments LP, which owns a 56% stake in Indigo and is owned by Gerald Schwartz, the husband of Indigo CEO Heather Reisman.

Trilogy Companies initially offered $2.25 per share, but increased their offer in April.

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

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

Indigo spokeswoman Madison Downey said in an email to The Canadian Press that Trilogy would not comment on the vote.

For Trilogy’s offer to be accepted, it required the approval of a two-thirds majority of Indigo shareholders and a simple majority vote of shareholders unrelated to Trilogy and its affiliates.

Approximately 95.09% of the votes of the shareholders represented at Monday’s meeting were in favor of accepting the agreement. Only 83% of the votes of shareholders unrelated to Trilogy and affiliates were in support of the offer.

The privatization allows Indigo to avoid scrutiny as it works to bring profitability and growth back to Canada’s largest bookstore.

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

Trilogy now faces a large amount of work.

Indigo is still recovering from a cyber attack that took down its website for a long time last year, a series of quarterly losses that led to a layoff in January and a succession of changes that saw four of its 10 board members to leave last year, with one alleging mistreatment. and “a loss of confidence in the board’s leadership.”

Reisman, who retired amid the turmoil, returned within months to lead Indigo.

The issues have come as inflation and high interest rates make many Canadians think twice about opening their wallets, especially for the discretionary items that Indigo is known for.

The trend particularly emerged during the holiday season, when Indigo executives admitted they had overbought and stocked an assortment of merchandise they discovered customers weren’t looking for in the final weeks before Christmas.

“Despite all their efforts, they’re not doing well,” Kai Li, the Canada Research Chair in Corporate Governance who teaches at the University of British Columbia, said of Indigo in February.

“It bleeds money.”

To turn things around, Indigo has been rolling out a transformation plan since at least November. Few details are being provided, but Reisman, who founded the chain in 1996, said it is meant to “return Indigo to both growth and profitability.”

In the months since she mentioned the plan, some stores have seen wellness products and popular American Girl dolls pulled from shelves, and Columbus Café & Co. moved into some Indigo spaces formerly owned by Starbucks. Reisman also committed via newsletters that it will bring back its digital inventory search kiosks, schedule more events and add seating in more stores.

Given all the problems Indigo has faced, the privatization “could be the change Indigo needs,” Liza Amlani, principal and founder at consultancy Retail Strategy Group, said in an email.

“Heather has a very clear point of view and a way of doing things. Now she has the literal workforce to do whatever she wants with her husband at the helm of Trilogy,” Amlani said.

“We can only hope that the privatization of Indigo will reimagine the stores with a relevant mix of product assortments. The retailer doesn’t seem to get it right, and the excess inventory and low margins are proof of that.”

Trilogy hasn’t said much about its plans for Indigo beyond that it wants to take the company private, but no public opposition to the deal has mounted, likely because the money offered reflected a 69 percent premium to the stock’s price of 1, $48 that Indigo had. when Trilogy first made its bid.

Indigo’s share price stood at $2.48 before Monday’s vote.

Last month, the offer won the support of a special committee of independent directors formed to evaluate the deal.

Earlier this month, Indigo also said independent proxy advisory firms Institutional Shareholder Services and Glass Lewis had 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. Its shares are expected to be delisted from the Toronto Stock Exchange sometime after.

This report by The Canadian Press was first published on May 27, 2024.

Companies in this story: (TSX:IDG)

Tara Deschamps, Canadian Press