Hudson’s Bay to buy Canadian fashion retailer Saks for $2.4 bn
30 Jul 2013
Hudson's Bay Company (HBC), one of North America's largest fashion department store chains, yesterday agreed to buy luxury retail group Saks Inc, for $2.4 billion in cash including debt.
This deal will combine three of the retail industry's most iconic brands - Hudson's Bay, Lord & Taylor and Saks Fifth Avenue - into a leading North American fashion retailer catering to the luxury, mid-tier and outlet retail sectors.
The combined company will operate 320 stores, including 179 full-line department stores, 72 outlet stores and 69 home stores in prime retail locations throughout the US and Canada, along with three e-commerce sites.
Toronto-based HBC, Canada's oldest company, will pay $16 a share, a 30-per cent premium to Saks's closing price on 20 May, the day before media reported on an impending deal.
HBC said that it intends to finance the transaction, and refinance certain existing indebtedness through a combination of approximately $1 billion of new equity, $1.9 billion of senior secured loans, $400 million of senior unsecured notes and cash on hand.
Ontario Teachers' Pension Plan and West Face Capital have separately committed to provide HBC with $500 million and $250 million of equity funding, respectively, to support the deal.
BofA Merrill Lynch and Royal Bank of Canada have provided HBC with fully committed credit facilities, which together with the equity commitment provided by Teachers', is sufficient to close the transaction, HBC said in a statement.
There is a 40-day ''go-shop'' period, during which Saks may solicit alternative proposals from third parties and the agreement includes unspecified breakup fees payable to HBC if the deal is terminated under certain circumstances.
The proposed acquisition will create a retail giant with 320 stores in the US and Canada, revenues of about $7 billion, annual cost synergies of C$100 million ($97 million) within three years.
Saks operates 41 Saks Fifth Avenue stores and 67 Saks Fifth Avenue OFF 5TH stores throughout the US and its online store, saks.com.
Saks Fifth Avenue is one of the world's specialty retailers and is renowned for its superlative American and international designer collections, its exclusive handbags, shoes, jewelry, cosmetics and gifts.
Saks Fifth Avenue OFF 5TH is a world-class, full-service destination for value-priced clothes and accessories for men, women, children and the home.
Founded in 1670, HBC is North America's longest continually operated company. It was acquired in 2008 by NRDC Equity Partners' Robert Baker, Bill Mack, Lee Neibart and Richard Baker, who had earlier acquired Lord & Taylor in 2006.
In Canada, HBC operates Hudson's Bay, Canada's largest fashion department chain with 90 stores, and thebay.com. HBC also operates Home Outfitters, Canada's largest home specialty superstore chain with 69 stores across the country.
In the US, HBC operates Lord & Taylor, a department store with 48 full-line stores throughout the northeastern US and in two major cities in the Midwest, and lordandtaylor.com.
''This exciting portfolio of three iconic brands creates one of North America's premier fashion retailers,'' stated Richard Baker, HBC's chairman and CEO. ''I've had a long connection with Saks over the years, and am thrilled to bring one of the world's most recognized luxury retailers into the HBC family.''
''This acquisition will increase our growth potential both in the US and Canada, generate significant efficiencies of scale, add to our powerful real estate portfolio and deliver substantial value to our shareholders,'' he added.
Steve Sadove, chairman and CEO of Saks, said, ''We believe this transaction delivers compelling value to our shareholders and that Saks Fifth Avenue is an excellent fit within the HBC organization. We also believe that HBC recognizes the tremendous value of our people, our real estate, our customer and vendor relationships, and most importantly the power and potential of our iconic brand.''
Saks will operate separately under the HBC umbrella, including its own merchandising, marketing and store operations teams, and will remain headquartered in New York City. It is also expected that Saks will continue to be led by key members of its existing management team.
