Canadian retailer Hudson’s Bay Company (HBC) has inked a deal to sell its remaining European real estate and divest the related retail joint (JV) for CAD1.5bn (US$1.13bn) amid the news a group of its shareholders wants to take the company private.
In a statement yesterday (10 June), HBC said its board has formed a special committee to review plans to privatise the company at a cash price of CAD9.45 per share.
The group submitting the proposal includes individuals and entities related to, or affiliated with, Richard Baker, governor and executive chairman of HBC; Rhône Capital; WeWork Property Advisors; Hanover Investments (Luxembourg); and Abrams Capital Management. The group disclosed that they collectively own about 57% of the outstanding common shares of HBC on an as-converted basis.
The proposed transaction represents a premium of 48% to HBC’s closing share price on the Toronto Stock Exchange on Friday (7 June) and a premium of 39% to its 20-day average closing price.
Meanwhile, in a separate statement HBC said it has inked a deal to sell the remaining stake in its German real estate JV, and divest its related retail JV to its partner, retail estate business Signa Holding. The transaction is expected to close in fall 2019 – and means Signa will completely own Galeria Kaufhof Karstadt.
The firms last year merged HBC’s and Signa’s respective HBC Europe and Karstadt Warenhaus GmbH’s retail operations last year to create what was thought to be Germany’s leading retailer with 243 locations, 32,000 employees, and annual revenue in excess of EUR5bn (US$5.66bn). A stake of 49.99% was owned by Canada’s HBC, while Signa Holding, the owner of Karstadt, held the remainder.
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By GlobalDataNow, HBC says the divestiture solidifies its strategic focus on its North American operations and greatest opportunities for growth, namely its Saks Fifth Avenue and Hudson’s Bay operations. A portion of the transaction’s net proceeds will be used to fortify HBC’s balance sheet by fully repaying its outstanding $436m term loan. Upon close, HBC will completely exit its German operations.
“This agreement is an exciting milestone for HBC as it will deliver important financial and strategic benefits,” says CEO Helena Foulkes. “Financially, it provides us with the best opportunity to capitalise on our German real estate and allows us to further strengthen our balance sheet. Strategically, we will be able to fully focus our resources on HBC’s North American operations, including our best growth opportunities – Saks Fifth Avenue and Hudson’s Bay. This transaction is another bold action that unlocks the value of our real estate and demonstrates our resolve to creating a stronger, more capable HBC.”
The “bold actions” referred to by Foulkes have so far included the sale last year of HBC’s member-based digital shopping business Gilt to US apparel and homewares retailer Rue La La, and plans to “right-size” its Lord & Taylor department stores, including a possible sale or merger of the business.
As part of its latest move, HBC will assume ownership of the Netherlands retail business, and release Signa from its 50.01% back-to-back guarantee of certain obligations of Hudson’s Bay Netherlands. Signa will assume German liabilities from HBC.
In its most recent trading update for the fourth quarter ended 2 February, HBC said net profit surged to CAD286m (US$214m) but it swung to a net loss from continuing operations of CAD226m. Fourth-quarter revenue, meanwhile, fell by CAD167m to CAD2.9bn.
