Report: Hudson’s Bay Company Considering a Neiman Marcus Bid

Fresh after considering – and abandoning – a bid for Macy’s Inc. (NYSE:M), Hudson’s Bay Company (TSX:HBC) has its eye on another U.S. retailer, Neiman Marcus. The Wall Street Journal was the first to report on Hudson’s Bay’s interest.

Neiman Marcus, which is owned by the Canada Pension Plan Investment Board and Ares Management, recently released its latest financial statements. Over its most recent six-month period, the luxury goods retailer saw a decline in revenue and a loss of $141 million, versus a loss of $2.7 million in the same period in 2015.

In a release, Neiman Marcus said it will start "a process to explore and evaluate potential strategic alternatives, which may include the sale of the company or other assets, or other initiatives to optimize its capital structure."

Neiman Marcus is burdened with a large debt load of $4.4 billion, with $2.9 billion set to come due in 2020. The rest will come due in 2021. Its bonds trade at just over $60 each, indicating investors don’t have much confidence the debt will be repaid.

Hudson’s Bay is reportedly only interested in buying the firm itself, and not taking on any of its debt. It’s likely the company is mostly interested in the real estate, which has been a theme in similar acquisitions.

According to a recent investor’s presentation, Hudson’s Bay maintains its real estate alone is worth more than $35 per share after accounting for debt, much higher than the current $11.77 share price. It plans to raise upwards of $2 billion by spinning off some of this real estate into two joint ventures, capital it looks willing to spend on an acquisition.