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HBC reportedly eyeing Macy’s for takeover

Floundering Macy’s announced operational restructuring and other cost-cutting measures earlier this year


 
A man walks past the Hudson's Bay Company sign in downtown Toronto on Wednesday, Feb. 4, 2009. Hudson's Bay Company, North America's oldest retailer, is setting up shop in the Netherlands. THE CANADIAN PRESS/Nathan Denette

A man walks past the Hudson’s Bay Company sign in downtown Toronto on Wednesday, Feb. 4, 2009. THE CANADIAN PRESS/Nathan Denette

TORONTO – 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, co-founder 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.

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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 annual expense 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 company reports its fourth-quarter earnings Feb. 21.

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. Macy’s shares were up US$1.58 at US$32.30 in afternoon trading, a gain of about five per cent for the day.

HBC’s shares, meanwhile, were up nearly four per cent on the Toronto Stock Exchange, after rising more than six per cent earlier in the day. The shares were up 39 cents at C$10.39 in afternoon trading.


 
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