TORONTO, Canada — Hudson’s Bay Company, the parent owner of Saks Fifth Avenue and Lord & Taylor, will review a proposal from a group of shareholders to take the retailer private, the company said Monday. The company also said it had sold stakes in two European joint ventures for C$1.5 billion, or $1.13 billion.
Executive Chairman Richard Baker is leading the bid for privatisation, alongside investor Rhône Capital and WeWork, which has a partnership with Hudson’s Bay that included the co-working space taking over the former Lord & Taylor flagship in Manhattan. The proposal values the company at C$1.74 billion ($1.3 billion), or $9.45 per share — a premium to its closing share price on Friday, but a significant drop from its recent peak in 2015, when the value of the stock reached $29.
Hudson’s Bay has been working to update Saks stores while sales have slid overall, including at Lord & Taylor and Saks Off Fifth, as the company’s conventional department stores have fallen out favour with investors, analysts and, increasingly, consumers, who prefer to shop directly at a number of emerging online brands and retailers that excel at engaging shoppers.
Shares are down more than 25 percent this year, and the company reported a loss of C$226 million ($170 million) in its most recent quarterly report released in April. On Monday, shares jumped 45 percent after the privitisation bid was announced.
Baker and the shareholder group collectively own about 57 percent of the company. A transaction would be partially financed by the sale of European real estate holdings as well as debt financing.
“We believe that improving HBC’s performance requires significant time and patient long-term capital that is better suited in a private company context without the emphasis on short-term results and returns,” Baker said in his letter to the board Monday.
Baker, a former real estate developer, bought Lord & Taylor in 2006 and later purchased the Hudson’s Bay department store chain in Canada and Saks Fifth Avenue, all of which he merged to create Hudson’s Bay Company. His initial plan was to capitalise on the real estate of these storied chains, at one point forming a plan to create a real estate investment trust that was scuttled as retail conditions worsened.
More recently, Hudson’s Bay has been slimming down its portfolio. Off-price retailer Gilt Groupe was sold to Rue La La last year. On Monday, the company said it would sell its 50 percent stake in its German real estate joint venture, effectively exiting the country just seven months after creating the partnership with Austrian real estate company Signa. Hudson’s Bay purchased Germany’s Galeria Kaufhof chain in 2015.
A portion of the proceeds will be “used to fortify HBC’s balance sheet by fully repaying its outstanding $436 million term loan,” the company said in a press release.
Stay tuned for updates to this developing story.