Hudson’s Bay agrees to sell half of European business
Austrian real-estate firm Signa Holding offers $1.3 billion for retailer stake
Hudson’s Bay Co. has agreed to sell half of its European business in a deal that would bring in more than $1 billion (all figures U.S.) in cash, according to people familiar with the situation, as the department store operator continues to shed assets amid a challenging environment for brick-and-mortar retailers.
The transaction, if completed, would unite Germany’s two biggest department store chains — longtime rivals Galeria Kaufhof GmbH and Karstadt Warenhaus GmbH — in one company.
Under the proposed deal, Austrian real-estate company Signa Holding GmbH will buy half of HBC Europe’s operating company, which includes Kaufhof, retail chains in Belgium and the Netherlands and Saks Off 5th stores in Europe, as well as half of HBC Europe’s real-estate company, one person said.
Signa, which owns Karstadt, will pay 1.1 billion euros ($1.3 billion) in cash and assume 750 million euros in debt for its 50% stake, this person said.
The agreement is non-binding and contingent on due diligence so it could still fall apart, the people said.
HBC, which earlier this year had rejected a three-billion euro offer from Signa for all of Kaufhof, has been paring back its operations, which consist of Saks Fifth Avenue, Lord & Taylor and Canada’s Hudson’s Bay chain.
The company has struggled as depart- ment stores lose ground to online retailers, fast fashion and off-price retail chains.
HBC recently agreed to sell e-commerce fashion seller Gilt Groupe to Rue La La and is scaling back its Lord & Taylor chain. HBC is closing up to 10 Lord & Taylor stores and the retailer will no longer occupy its flagship store on Manhattan’s Fifth Avenue, which HBC sold last year to WeWork Cos.
The moves are a reversal for HBC Chairman Richard Baker.
Baker built up the company through a series of acquisitions and in the last few years tried unsuccessfully to buy Macy’s Inc. and Neiman Marcus Group. Former CVS executive Helena Foulkes, who joined HBC as chief executive in February, has said there are no “sacred cows” when it comes to fixing the business.
Activist investor Land & Buildings Investment Management LLC has pushed the company to sell assets and make better use of its real estate as losses have piled up.
In the most recent quarter, which ended May 5, HBC’s net loss widened to 314 million Canadian dollars from a loss of C$214 million a year earlier. Total sales were C$3.09 billion, with comparable sales falling 0.9% from the year-earlier period.
The deal with Signa values HBC Europe at 3.7 billion euros, more than the 2.5 billion that HBC paid for the business three years ago, according to the person familiar with the situation.
Most of the value appreciation has come from the real estate, as the operating company has struggled. In the period ended in May, HBC Europe’s samestore sales fell 6.6%.