TORONTO -- An influential proxy advisory service is recommending shareholders vote against a takeover offer for Hudson's Bay Co. by a group led by the retailer's executive chairman.

Institutional Shareholder Services raised concerns about the disclosures surrounding the $10.30 per share offer by a group led by HBC executive chairman Richard Baker.

A rival offer of $11 per share made by Catalyst Capital Group has been rejected by HBC's special committee because it says the Baker-led group, which holds a 57 per cent stake in the retailer, is not interested in selling its shares.

ISS raised questions about the thoroughness of the sale process and if the agreed transaction maximizes value for minority HBC shareholders.

"Given that significant defects have been identified with the sale process, shareholders cannot be confident they are receiving maximal available value for their shares," ISS said in its report.

The proxy advisory firm said the "only defect" of the rival offer identified by HBC's special committee was the opposition of the Baker-led group of continuing shareholders.

However, the special committee at HBC said Monday the ISS report is flawed and urged shareholders to support the offer by the Baker-led group. It pointed to an acknowledgment by ISS that there is meaningful downside risk if shareholders don't approve the deal.

"The $10.30 per share offer is the only offer available to minority shareholders and provides immediate and certain value at a significant market premium," said David Leith, chairman of HBC's special committee.

"We continue to strongly recommend that HBC shareholders vote for the take-private transaction."

Catalyst has asked a regulator to block the privatization bid or, at least, require HBC to amend its information circular. The Ontario Securities Commission is scheduled to hear that matter on Wednesday.

"Catalyst has been working to protect the interests of the minority shareholders, including offering all shareholders a superior proposal to the Baker Group," said Gabriel de Alba, managing director and partner of Catalyst.

"We will continue to push the HBC independent directors to finally step up and do their duty to protect shareholders, run a true value maximization process and restrict the coercive and questionable efforts of Richard Baker."

This report by The Canadian Press was first published Dec. 9, 2019