(Reuters) – Institutional Shareholder Services said on Friday it recommends shareholders vote against a plan by the chairman of Hudson’s Bay Co (TO:) to take the Saks Fifth Avenue owner private after the bid was topped by an offer from Catalyst Capital Group Inc.

In October, Hudson’s Bay agreed to a C$1.9 billion ($1.4 billion) offer worth C$10.30 per share from shareholders led by Chairman Richard Baker.

The group, which collectively owns 57% of Hudson’s Bay, includes private equity firm Rhone Capital LLC and office-space sharing start-up WeWork’s property arm.

But private equity firm Catalyst Capital Group Inc, which owns 17.5% of Hudson’s Bay and was unhappy with the bid by the Baker-led consortium, offered C$11 per share in November.

ISS said in a note there was “no legitimate rationale from a governance perspective for recommending shareholders accept a lower offer.”

David Leith, chairman of Hudson’s Bay’s special board committee that negotiated the sale to Baker’s group, said this week that the Catalyst offer was not an option available to Hudson’s Bay shareholders.

They could either accept the Baker-led offer or Hudson’s Bay would continue as a public company, he said.

Hudson’s Bay shares closed at C$9.13 on Friday, in a sign that investors do not expect either bid to succeed.

Catalyst has urged Hudson’s Bay shareholders to shoot down the deal with Baker in a vote scheduled for Dec. 17. Baker’s consortium will be excluded from the vote on the deal.

Representatives for Hudson’s Bay and Catalyst did not respond to Reuters’ requests for comment late on Friday.

Baker’s take-private offer comes seven years after he took Hudson’s Bay public, and values the company at just a third of its 2015 worth, reflecting the challenges brick-and-mortar retailers face as they compete with online shopping.

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2019-12-07