PE backed Hudson’s Bay acquires Saks for $2.9bn


Financier Worldwide Magazine

September 2013 Issue

September 2013 Issue

Canada’s oldest company, Hudson’s Bay Co (HBC), announced on 29 July that it has agreed to acquire upscale department store Saks Inc in a deal valued at $2.9bn including $500m of Saks’ debt obligations.

HBC, owned by private equity firm NRDC Equity Partners, will pay Saks’ shareholders $16 per share to acquire the company, a 30 percent premium on the company’s 20 May share price – the day rumours of the takeover first began – and 4.5 percent higher than Saks’ market closing price Friday 26 July.

According to a joint statement between the two companies, in 2012 the combined firm would have generated sales of C$7.2bn and normalised earnings before interest, taxes, depreciation and amortisation (EBITDA) of C$587m before synergies. The combined company expects to produce C$100m in synergies within three years.

The deal, which has been approved by each company’s board of directions, is still subject to approval by Saks’ shareholders, and to other customary and regulatory closing conditions. The two companies expect the transaction to close before the end of 2013.

Once the deal has been completed, the newly merged company will operate around 320 stores, including 179 full-line department stores, 72 outlet stores and 69 home stores throughout the United States and Canada, along with three e-commerce sites. Richard Baker, chairman and chief executive of HBC, announced that the group plans to open seven new Saks stores in Canada by 2014, as well as around 25 of Saks’ popular ‘Off Fifth’ outlet stores.

Under the terms of the deal, the companies announced that Saks will continue to operate separately within the HBC portfolio and will remain headquartered in New York. The Saks brand will continue to be led by members of the company’s current management team while also retaining its own merchandising, marketing and operational teams. In the companies’ joint statement Mr Baker said “I’ve had a long connection with Saks over the years, and am thrilled to bring one of the world’s most recognised luxury retailers into the HBC family. With the addition of Saks, HBC will offer consumers an unprecedented range of retailing categories and shopping experiences. This acquisition will increase our growth potential both in the US and Canada, generate significant efficiencies of scale, add to our powerful real estate portfolio and deliver substantial value to our shareholders.”

As per the terms of the agreement Saks has a 40 day ‘go-shop’ period during which time the company can solicit alternative proposals from third parties. Steve Sadove, chairman and chief executive of Saks, noted that Saks “believe(s) this transaction delivers compelling value to our shareholders and that Saks Fifth Avenue is an excellent fit within the HBC organisation. We also believe that HBC recognises the tremendous value of our people, our real estate, our customer and vendor relationships, and most importantly the power and potential of our iconic brand.”

HBC announced that it intends to finance the deal and refinance some of its own debt via a combination of around $1bn of new equity, $1.9bn of senior secured loans, $400m of senior unsecured notes, and available cash on hand. Furthermore, an affiliate of the Ontario Teachers’ Pension Plan, and funds advised by private equity firm West Face Capital Inc, have separately committed to provide HBC with $500m and $250m of equity funding respectively. Bank of America Merrill Lynch and the Royal Bank of Canada have also agreed to provide HBC with fully committed credit facilities to help finance the deal.

In a further effort to refinance some of the company’s debt HBC has announced that it will be reducing its quarterly shareholder dividend once the deal has been closed. HBC will reduce the dividend by C$0.05 per share to C$0.09375 per share.

© Financier Worldwide


Richard Summerfield

©2001-2016 Financier Worldwide Ltd. All rights reserved.