FINANCE

Hudson’s Bay, parent of Saks and Lord & Taylor, may go private; exits Germany

BY Marianne Wilson

Struggling department store giant Hudson’s Bay Co. has received a proposal to go private.

A group of HBC shareholders, led by chairman Richard A. Baker,  has made an offer to take the company private at a price of  $9.45 (Canadian dollars)  per share, payable in cash. The deal would value HBC’s stock at $1.7 billion (Canadian dollars), or $1.28 billion. The group, which also includes Rhône Capital L.L.C. WeWork Property Advisors, Hanover Investments (Luxembourg) S.A. and Abrams Capital Management, collectively own about 57% of the outstanding common shares of the company.

The proposed transaction represents a premium of 48% to HBC’s closing share price on the Toronto Stock Exchange on June 7, 2019,  and a premium of 39% to its 20-day average closing price.

HBC, which has been challenged with falling sales,  has been closing  underperforming stores and divisions. In February, it announced a “fleet review” of Saks Off 5th’s 133 stores (with estimates of closing up to 20 U.S. locations) and the shuttering of all 37 of its Home Outfitters stores in Canada. In May, HBC said it  is reviewing strategic options for its Lord & Taylor division, including a sale. The company also has completed the sale of the Lord & Taylor flagship on Fifth Ave. to WeWork, and announced the closing of its Saks Fifth Avenue location at Brookfield Place in Manhattan.

The HBC board has formed a special committee of independent directors to review the proposal by the shareholders group. The committee has retained Blake, Cassels & Graydon LLP as legal counsel and J.P. Morgan Securities as financial advisor to assist in its review.

“The special committee noted that no decision has been made and it intends to carefully and thoroughly review the proposal with the assistance of its outside financial and legal advisors,” the company stated. “There can be no assurance that any definitive agreement will be executed or that the proposed transaction will be approved or consummated.”

In other news, HBC is exiting Germany with an agreement to sell the remaining stake in its German real estate joint venture, and divest its related retail joint venture to its partner, SIGNA, along with assumption of certain obligations for a total consideration of  $1.5 billion (Canadian dollars). A portion of the transaction’s net proceeds will be used to fortify HBC’s balance sheet by fully repaying its outstanding $436 million term loan. Upon close, HBC will completely exit its German operations.

“This agreement is an exciting milestone for HBC as it will deliver important financial and strategic benefits,” said Helena Foules, CEO, HBC. “Financially, it provides us with the best opportunity to capitalize on our German real estate and allows us to further strengthen our balance sheet. Strategically, we will be able to fully focus our resources on HBC’s North American operations, including our best growth opportunities – Saks Fifth Avenue and Hudson’s Bay. This transaction is another bold action that unlocks the value of our real estate and demonstrates our resolve to creating a stronger, more capable HBC.”

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