UPDATE: HBC to bring Saks stores to Canada following acquisition
Hudson’s Bay Co. says it will open up to seven full-line Saks stores in Canada and about two dozen locations under a discount banner once it completes a US$2.9-billion friendly deal to acquire the U.S. luxury retailer.
“We’re going to move as quickly as we can,” Richard Baker, HBC’s chairman and chief executive, told analysts during a conference call on Monday.
“We think there’s a lot of opportunity for us to accomplish that rollout relatively quickly.”
Saks currently operates 42 stores, including its flagship Saks Fifth Avenue in New York.
HBC says it may transform some its The Bay stores into Saks locations, open new Saks stores in existing buildings or, in some cases, build new stores from the ground up.
The retailer says it also plans to open up to 25 Saks Off Fifth discount stores in Canada and is eyeing the possibility of starting a real estate investment trust.
The combined portfolio of The Bay stores in Canada, Lord & Taylor in the U.S. Northeast and Saks locations would comprise more than 32 million square feet of retail space, said Baker.
“The combination of Saks and HBC real estate creates an unmatched, highly valuable North American retail real estate portfolio, with a coast-to-coast footprint serving three strong banners,” Baker said .
“We will evaluate strategic alternatives to fully realize value from the combined property portfolio, including but not limited to the creation of a real estate investment trust. This will enable our company to unlock additional value and accelerate deleveraging.”
HBC plans to keep Saks as a separate unit headquartered in New York.
“While there are numerous opportunities to collaborate and drive efficiencies, we will respect the integrity and uniqueness of the Saks franchise,” said Baker.
“Saks is an iconic, distinctive and powerful franchise that we are committed not only to preserving but to enhancing and building. We intend to maintain and build upon Saks identity as a luxury retailer.”
HBC’s other holdings include The Bay and Home Outfitters in Canada and Lord & Taylor in the U.S. Northeast.
The Toronto-based company says it will pay US$16 per Saks share plus assume debt as part of the transaction, announced early Monday after months of rumours that a deal was in the works.
HBC says it will issue US$1 billion worth of equity and $2.3 billion of debt securities to pay for Saks.
It has received commitments from the Ontario Teachers Pension Plan, which will buy about US$500 million of the equity, and Canadian private equity firm West Face Capital, which will buy US$250 million of the new HBC equity.
Hudson’s Bay Co. will also issue US$1.9 billion of secured loans and US$400 million of unsecured notes.
HBC has 48 Lord & Taylor department stores in the U.S. Northeast and in Canada it has 90 Bay department stores and 69 Home Outfitters housewares stores in Canada.
Together, the combined company will have about 320 stores, including 179 full-line department stores, and about C$7.2 billion of sales annually.
HBC has been eyeing the struggling high-end American chain for the past few months and there were reports on the weekend that a deal was close. However, an earlier report in the New York Post late last week said HBC could face competition from at least one other potential buyer for Saks.
Saks chairman and CEO Steve Sadove said in a joint statement Monday that the deal with HBC represents a 30 per cent premium above the value of Saks on May 20, before media speculation on the deal emerged.
“We believe this transaction delivers compelling value to our shareholders and that Saks Fifth Avenue is an excellent fit within the HBC organization,” Sadove said.
“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.”
HBC will receive financial backing from the Ontario Teachers’ Pension Plan, which has one of Canada’s largest institutional funds, and issue a combination of new equity and debt securities to pay for Saks.
Teachers has received 1.5 million warrants and will receive an additional 3.5 million warrants once the deal closes, after a 40-day “go-shop” period when Saks will be entitled to seek out a higher offer.
The warrants allow Teachers to buy HBC shares at C$17 each, which is above Friday’s closing price for the stock on the Toronto Stock Exchange.
West Face will receive 1.75 million warrants when the deal closes.
Saks would pay a fee to HBC if their deal doesn’t go through but HBC would not provide details as the amount.
HBC shares were up $1.01, or 6.12 per cent, to $17.50 on the Toronto Stock Exchange Monday morning. Saks shares (NYSE:SKS) were up 51 U.S. cents, or 3.33 per cent, to $15.82, on the New York Stock Exchange in morning trading.
This story can be found at: http://marketingmag.ca/brands/hbc-to-buy-u-s-high-end-retailer-saks-84712.
Copyright © 1996-2022 Brunico Communications Ltd. All Rights Reserved.