HBC mulls US$3.5B offer for European business

Despite an unsolicited offer worth a reported US$3.5 billion for its European department store business, it’s not clear that Hudson’s Bay Co. will jump at the chance to offload the Galeria Kaufhof brand or halt an expansion of its flagship stores into Europe.

Toronto-based HBC confirmed that it received “an incomplete, non-binding and unsolicited offer with no evidence of financing ” on Wednesday for Kaufhof and other real estate assets from rival Signa Holding GmbH, Austria’s largest privately owned real estate company.

“Our European business is an important element of the company’s strategy,” the owner of Saks, Lord & Taylor and Hudson’s Bay said in a statement, adding that its board intends to review Signa’s offer. It did not disclose the amount.

“HBC remains focused on executing its strategy and plans for the upcoming holiday season.”

Earlier, Reuters had reported the offer of three billion euros was fully financed, citing sources close to the deal. HBC’s stock jumped 10 per cent on the news.

HBC has been expanding its European retail business even as the broader environment has grown bearish on department stores, opening the first of 20 Hudson’s Bay stores in the Netherlands in September, as well as five Saks Off Fifth stores in Germany.

While HBC executive chairman and acting CEO Richard Baker might be keen to divest assets where the firm can maintain a retail presence, it’s not as clear that he would sell the entire European business to a rival real estate investor.

Regardless, it would appear to be an opportune time for Signa to take another run at Kaufhof, which it tried to buy in 2015 but was outbid by HBC’s offer of 2.5 billion euros, including debt.

Since then, performance in HBC’s European division has been weak amid a rapidly shifting environment for department stores. The company has been under pressure from activist investor Jonathan Litt since June to divest some of its real estate, and the European business in particular.

In the fiscal year ending Jan. 8, 2017, same-store sales at HBC Europe fell 1.2 per cent, after rising a tepid 1.7 per cent a year earlier.