Canada’s oldest company was very much in the news this week, and the markets are still buzzing about Hudson’s Bay Company’s (T.HBC) purchase of New York-based department store giant Saks Company (NYSE: SKS), a move that experts say bring the Bay into even higher echelons of the retail industry.
The deal, announced Monday, was a friendly one, with a price tag of $2.4 billion U.S., or $16 U.S. per share, about 30% higher than where Saks shares traded in May, before takeover speculation pushed the price even higher.
Experts say that Saks has a 40-day window to solicit other offers, but HBC declined to offer details of what the break fee might be if the deal falls apart.
The prime downtown locations of Hudson’s Bay provides Saks an edge in the contest for luxury market consumers as Canada’s condominium-buying population gravitates to cities.
HBC CEO Richard Baker suggested the company hopes to open as many as seven full-line Saks stores -- and 25 Saks Off Fifth locations in Canada – by next year. The latter is the name for Saks's discount outlet stores.
Baker over the past seven years has acquired and refreshed retail chains while leveraging their real estate. Baker and NRDC Equity Partners LLC, agreed to buy Hudson’s Bay in 2008, investing $500 million U.S. in new equity.
The key to the deal, according to the deal, is Saks’ real estate, valued at $1.5 billion U.S. said Perry Caicco, an analyst at CIBC World Markets, in a note to clients on July 30. Saks’ real estate was acquired at 10.7 times earnings before interest, taxes, depreciation and amortization and he added, can be “spun into a REIT (Real Estate Investment Trust) at a much higher multiple.”
Saks operates 42 stores, including its flagship Saks Fifth Avenue in New York. HBC has 48 Lord & Taylor department stores in the U.S. northeast. In Canada, it has 90 Bay department stores and 69 Home Outfitters houseware stores.
HBC reported a loss of $80.7 million on sales of $884 billion in the first quarter of 2013 compared with a $129.7 million loss on sales of $848.2 million in the year-ago period.
HBC stock closed Friday’s session up 22 cents to $17.59, within a 52-week range of $14.00 to $18.00, a peak achieved last Wednesday.
