Hud­son’s Bay mak­ing bid for re­tail gi­ant Macy’s: re­port

Cape Breton Post - - CLASSIFIEDS/BUSINESS - BY ALEK­SAN­DRA SA­GAN

Hud­son’s Bay. Co. ap­pears to be con­tin­u­ing its ag­gres­sive in­ter­na­tional growth with re­ports it’s eye­ing an­other Amer­i­can re­tailer, Macy’s Inc.

HBC de­clined to com­ment af­ter a re­port by the Wall Street Jour­nal, cit­ing un­named sources, said the two re­tail gi­ants were in pre­lim­i­nary talks for a takeover.

“We do not com­ment on ru­mour or spec­u­la­tion,” HBC spokes­woman Tif­fany Bourre wrote in an email. A Macy’s spokesper­son echoed the re­sponse.

But it’s likely where there’s smoke, there’s fire, said re­tail an­a­lyst Bruce Win­der, co­founder and part­ner of Re­tail Ad­vi­sors Net­work.

“There’s prob­a­bly some­thing here go­ing on be­hind the scenes.”

It’s likely HBC is af­ter Macy’s ex­ten­sive real es­tate, Win­der said.

As of April 2, 2016, the com­pany op­er­ates about 870 stores across the United States as well as Guam and Puerto Rico, ac­cord­ing to Macy’s web­site. In Au­gust, the com­pany an­nounced it would close about 100 lo­ca­tions.

Star­board Value LP., a New York-based in­vest­ment ad­viser and sig­nif­i­cant share­holder in Macy’s, has been pres­sur­ing the re­tail chain to spin off its real es­tate hold­ings. Star­board es­ti­mates the as­sets are worth US$21 bil­lion and could be turned into joint-ven­ture real es­tate in­come trusts that would cre­ate $10 bil­lion in share­holder value.

Macy’s hired an ex­ec­u­tive vice-pres­i­dent for real es­tate last year with the task of cre­at­ing and struc­tur­ing real es­tate op­por­tu­ni­ties. In Novem­ber, the com­pany an­nounced a strate­gic al­liance with Brook­field As­set Man­age­ment, giv­ing the as­set man­ager two years to cre­ate more value from some of its real es­tate.

Win­der said it is likely Richard Baker, HBC’s gov­er­nor and ex­ec­u­tive chair­man, is in­ter­ested in Macy’s real es­tate as well, adding Baker has had a keen eye for this kind of deal in the past.

HBC, founded in 1670, has made a num­ber of ac­qui­si­tions in re­cent years.

In 2013, HBC an­nounced it struck a deal to ac­quire Saks Inc. for US$2.9 bil­lion, in­clud­ing debt. The ac­qui­si­tion al­lowed it to bring the lux­ury re­tailer Saks and its dis­count brand Saks Off 5th to Canada. Since then, HBC has opened two Saks lo­ca­tions and nine Saks Off 5th stores in the coun­try, with many more planned.

HBC also pur­chased Ga­le­ria Kaufhof, the largest depart­ment chain in Ger­many and Bel­gium, for C$3.9 bil­lion in 2015 as part of a ma­jor over­seas ex­pan­sion plan. It plans to open 40 Saks Off 5th dis­count stores in Ger­many and up to 20 new stores in the Nether­lands, un­der the Hud­son’s Bay and Saks Off 5th ban­ners.

Macy’s fi­nan­cial strug­gles make the takeover bid a pos­si­bil­ity, Win­der said.

Ear­lier this year, the com­pany, which em­ploys nearly 158,000 peo­ple, an­nounced sig­nif­i­cant op­er­a­tional re­struc­tur­ing and other cost-cut­ting mea­sures ex­pected to gen­er­ate sav­ings of US$550 mil­lion.

The re­tailer also re­vised its guid­ance for its 2016 fi­nan­cial year, low­er­ing its di­luted earn­ings per share ex­pec­ta­tions for the year by be­tween 20 and 30 cents US.

The mar­kets took the spec­u­la­tion of an­other ac­qui­si­tion as a pos­i­tive sign as shares in both re­tail­ers moved higher.

Macy’s stock rose nearly 12 per cent in early trad­ing be­fore giv­ing up some of the gains.

$1 1)050

This file photo shows a Macy’s sign be­ing il­lu­mi­nated on a store mar­quis, in New York. Hud­son’s Bay Co. is de­clin­ing com­ment af­ter a re­port that the Cana­dian re­tailer is mak­ing a bid to take over Macy’s Inc.

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