Canada’s oldest company, Hudson’s Bay Co. will soon be in public hands again after the storied retailer said Wednesday it is going to make a return to the stock market following an upscale makeover.
The owner of the Bay, Home Outfitters and U.S. retailer Lord and Taylor filed a preliminary prospectus for an initial public offering of its shares Wednesday after years of hinting that it is in the works.
HBC last traded on the Toronto Stock Exchange in 2006 before it was taken private by U.S. businessman Jerry Zucker, who later died unexpectedly. New York-based NRDC Equity Partners acquired the company in 2008 for $1.1 billion from Zucker’s widow.
Since then, the company has been working to transform stores that were “tired and in need of renovation” as well as revamp its image after losing “its fashion credibility,” the company said in its filings.
“Our investments in Hudson’s Bay since July 2008 have enabled us to add new, sought after brands and Hudson’s Bay is becoming a fashion authority in Canada,” it said.
The company, which plans to use the proceeds of the offering to repay debt, said it has improved sales productivity and earnings growth, partially through a capital investment of more than $420 million since 2009, but added it has more work to do.
The price and number of shares to be sold were not disclosed. However, HBC did say it plans to pay a quarterly dividend with a target payout ratio of 20 to 25 per cent of expected net earnings.
Jennifer Radman, a portfolio manager at Caldwell Investment Management, said a rare Canadian retail asset like HBC could fetch “huge demand” from investors, though stock markets are still volatile.
“A lot of investors, they buy stocks based on what they know, so I think from that standpoint there will be a lot of demand, regardless of the valuations that are placed on the stock,” she said.
In terms of an initial valuation, Radman looked at where some of its U.S. peers are trading, like Macy’s, which trades at 13.5 times earnings and TJX Group – owner of T.J. Maxx, Winners and Marshall’s stores – which trades at 18 times earnings.
She estimated HBC could get away with pricing itself at between 12.5 and 17 times earnings.
