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Hudson's Bay to Acquire Saks for $2.9 Billion

Posted: July 29, 2013

Hudson’s Bay Company (HBC) and Saks Incorporated announced they have entered into a definitive merger agreement whereby HBC will acquire Saks for $16 per share in an all-cash transaction valued at approximately $2.9 billion, including debt. The transaction has been approved by each company’s board of directors and is expected to close before the end of the calendar year, subject to approval by Saks shareholders, regulatory approvals and other customary closing conditions.

This transaction will bring together three of the retail industry’s most iconic brands—Hudson’s Bay, Lord & Taylor and Saks Fifth Avenue—to create a leading North American retailer addressing a broad consumer spectrum across the luxury, mid-tier and outlet retail sectors. HBC will continue to build upon Saks’ market-leading position and identity as a luxury retailer. The combined company will operate 320 stores, including 179 full-line department stores, 72 outlet stores and 69 home stores in prime retail locations throughout the U.S. and Canada, along with three e-commerce sites. The combined company would have generated pro forma sales and normalized EBITDA in fiscal 2012 of approximately C$7.2 billion and C$587 million, respectively, before any synergies. HBC expects to achieve C$100 million of annual synergies within three years.

“This exciting portfolio of three iconic brands creates one of North America’s premier fashion retailers,” stated Richard Baker, HBC’s chairman and CEO. “I’ve had a long connection with Saks over the years, and am thrilled to bring one of the world's most recognized 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 U.S. and Canada, generate significant efficiencies of scale, add to our powerful real estate portfolio and deliver substantial value to our shareholders.”

Steve Sadove, chairman and CEO of Saks, commented, “We believe this transaction delivers compelling value to our shareholders and that Saks Fifth Avenue is an excellent fit within the HBC organization. We also believe that HBC recognizes 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. The $16 per share price represents an approximate 30% premium to the May 20, 2013, closing price, the day before media speculation began. We have made significant progress over the past few years to position Saks for future growth and to evolve into an omnichannel retailer. We are excited about what this opportunity and being part of a much larger enterprise can mean for the future of the Saks Fifth Avenue brand.”

The acquisition of Saks will drive significant revenue growth opportunities for HBC. This includes the introduction of Saks into Canada through full-line, outlet and online formats, building upon Canada’s position as saks.com’s largest international ship-to market. The combination will maximize existing e-commerce platforms across all three banners to enhance customers’ shopping experience. HBC also plans to continue Off 5th's expansion throughout the U.S.

The transaction further advances HBC’s previously articulated strategy for enhanced growth. HBC will continue to execute its investment plan across all three banners to upgrade the customer experience and deliver greater productivity in its stores and omni-channel platforms.

HBC expects to realize C$100 million in annual synergies within three years through a combination of operational efficiencies, implementing best practices across banners and back-office consolidation. HBC will leverage top talent across both organizations and optimize a multi-banner shared services organization to drive additional benefits and reduce expenses.

HBC is committed to preserving and building upon the iconic position of the Saks Fifth Avenue brand. Saks will operate separately under the HBC umbrella, including its own merchandising, marketing and store operations teams, and will remain headquartered in New York City. It is also expected that Saks will continue to be led by key members of its existing management team.

There is a 40-day “go-shop” period under the terms of the agreement, during which Saks may solicit alternative proposals from third parties. Saks does not anticipate that it will disclose any developments with regard to this process unless and until Saks’ board of directors makes a decision with respect to a potential superior proposal. There can be no assurance that this process will result in a superior proposal. The agreement also includes customary breakup fees payable to HBC in connection with the termination of the agreement in certain circumstances.