Lord & Taylor’s Parent HBC To Acquire Saks For $2.9B Cash

Lord & Taylor’s Parent HBC To Acquire Saks For $2.9B Cash

Hudson’s Bay Co (TSE:HBC) is seeking to buy luxury retailer Saks Inc (NYSE:SKS) for $16 per share, or $2.9 billion in cash, including debt. The operator of department store chains Lord & Taylor in the United States and The Bay in Canada said that it will buy and bring Saks in Canada to compete against retailers like Holt Renfrew and, soon to be launched, Nordstrom, Inc.(NYSE:JWN).

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Lord & Taylor's Parent HBC To Acquire Saks For $2.9B Cash

Details of the deal

HBC is paying $16 per share, which is a 30.3 percent premium over Saks Inc (NYSE:SKS) shares level on May 20, when the reports on the sale of the company emerged in media. Previously, Saks stock hit this price in 2008 before people started spending less due to recession, says a report from Reuters

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Saks will get a 40 day “go-shop” period in which it can examine better bids, however, there are less chances that it would come across any.

The deal will be financed by issuing $1 billion of new stock and $400 million of new bonds, borrowing around $ 1.8 billion of new loans along with available cash on hand.

Plans for Saks

 Saks Inc (NYSE:SKS) is popular for its Fifth Avenue flagship in Manhattan and will be a separate segment under HBC with its own merchandising, marketing and store operations teams. Its New York headquarters will also remain under its possession.

After acquiring Saks, there will be flagship stores in cities like New York, Montreal and Toronto and according to HBC it will create real estate investment trust to benefit from that portfolio. Saks Fifth avenue stores, off fifth outlets and its website will be launched in Canada.

Benefits to Hudson Bay

The combined company will be a greater strength in the retail industry having 320 locations in total, out of which 179 are full department stores. In 2012, if merged, the company would have earned revenue of $7 billion.

The benefits of the deal include cost savings with Hudson Bay Company expected to earn around $97.3 million within next three years. “This exciting portfolio of three iconic brands creates one of North America’s premier fashion retailers,” said Richard A. Baker, the Hudson’s Bay Company’s chairman and chief executive.  He added that he has been in touch with Saks Inc (NYSE:SKS) over the years and is thrilled to add one of the most popular luxury retailers to HBC.

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Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com
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