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RAPAPORT... Hudson's Bay Company entered into an agreement to purchase Saks Incorporated 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. The deal is expected to bring together three of the retail industry's most iconic brands – Hudson's Bay, Lord & Taylor and Saks Fifth Avenue – and create a leading North American retailer addressing a broad consumer spectrum across the luxury, mid-tier and outlet retail sectors. Hudson's Bay 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 ecommerce sites. The combined company would have generated pro forma sales and normalized EBITDA in fiscal 2012 of approximately $7.2 billion and $587 million, respectively, before any synergies. Hudson's Bay expects to achieve $100 million of annual synergies within three years. "This exciting portfolio of three iconic brands creates one of North America's premier fashion retailers," said Richard Baker, Hudson's Bay chairman. "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 Hudson's Bay family. With the addition of Saks, Hudson's Bay 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, the chairman of Saks, said, "We believe this transaction delivers compelling value to our shareholders and that Saks Fifth Avenue is an excellent fit within the Hudson's Bay organization. We also believe that Hudson's Bay 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 percent 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 omni-channel 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."
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 unless and until Saks' board of directors makes a decision with respect to a potential superior proposal.
Hudson's Bay was founded in 1670 and is North America's longest continually operated company. It was purchased in 2008 by NRDC Equity Partners' Robert Baker, Bill Mack, Lee Neibart and Richard Baker, who had previously purchased Lord & Taylor in 2006. In Canada, Hudson's Bay operates Hudson's Bay, Canada's largest department store with 90 locations as well as thebay.com. Hudson's Bay also operates Home Outfitters, Canada's largest home specialty superstore with 69 locations across the country. In the U.S. it operates Lord & Taylor, a department store with 48 full-line store locations throughout the northeastern U.S. and in two major cities in the Midwest, and lordandtaylor.com. Hudson's Bay trades on the Toronto Stock Exchange under the symbol ''HBC.''
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