Saks Incorporated agreed on Monday to sell itself to the Hudson’s Bay Company for about $2.4 billion in cash, uniting the storied luxury retailer with Lord & Taylor and the Canadian chain Hudson’s Bay.
Under the terms of the terms of the deal, the Hudson’s Bay Company will pay $16 a share in cash, about 4.5 percent higher than Saks’ closing price on Friday. The price is about 30 percent higher than Saks’ closing price on May 20, the last day before reports about a possible sale began to emerge.
Including the assumption of debt, the transaction is valued at roughly $2.9 billion.
Monday’s deal will create an even bigger player in the world of retail, with the combined company running 320 locations in total, 179 of which are full department stores. The merged retailer would have reported about $7 billion in revenue in the 2012 fiscal year.
Among the attractions of the deal are cost savings, with the Hudson’s Bay Company expecting to reap about $97.3 million within the next three years. It will also introduce Saks Fifth Avenue stores, Off Fifth outlets and Saks’ Web site into Canada.
“This exciting portfolio of three iconic brands creates one of North America’s premier fashion retailers,†Richard Baker, the Hudson’s Bay Company’s chairman and chief executive. “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.â€
Steve Sadove, the chief executive of Saks, added: “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.â€
The deal was announced several months after Saks began entertaining the idea of a sale. A number of other parties had expressed interest in either buying the 90-year-old department store chain or making a substantial investment in it, people briefed on the matter said previously. Among them were Kohlberg Kravis Roberts, which had considered trying to arrange a merger of Saks with a rival, Neiman Marcus, and the Qatar Investment Authority, a sovereign wealth fund of the Middle Eastern emirate.
The Hudson’s Bay Company plans to finance the merger by issuing about $1 billion of new stock and $400 million of new bonds, borrowing about $1.8 billion of new loans and available cash on hand.
Under the terms of Monday’s deal, Saks has 40 days under a so-called “go-shop†period to find alternative suitors.
Saks received advice from Goldman Sachs, Morgan Stanley, Guggenheim Securities and the law firm Wachtell, Lipton, Rosen & Katz. The Hudson’s Bay Company was advised by Bank of America Merrill Lynch, RBC Capital Markets and the law firms Stikeman Elliott and Willkie Farr & Gallagher.
