Hudson's Bay agrees to $1.9B deal to go private
October 21, 2019
October 21, 2019 8:34 PM EDT
(KOEN VAN WEEL/AFP/Getty Images)
Saks Fifth Avenue owner Hudsonís Bay Co said on Monday it agreed to a sweetened $1.9-billion offer from a shareholder group led by executive chairman Richard Baker to take the struggling Canadian department store operator private.
The deal comes seven years after Baker took Hudsonís Bay public and values the company at just a third of its 2015 worth, reflecting the challenges facing brick-and-mortal retail chains amid the rising popularity of online shopping.
Shareholders led by Baker who collectively own 57% of Hudsonís Bay, including private equity firm Rhone Capital LLC and office-space sharing start-up WeWorkís property arm, unveiled a $9.45 per share bid in June to buy the company from its remaining shareholders.
In response, Hudsonís Bay formed a special committee of independent directors to evaluate the offer and negotiate with the consortium. It on Monday called the improved offer, worth $10.30 a share, ďthe best path forward for Hudsonís Bay and the minority shareholders.Ē
The deal now has to be approved by a majority of the shareholders not affiliated with Bakerís consortium in a shareholder vote. This means that shareholders accounting for at least a 27% stake in the company must greenlight the offer.
Private equity firm Catalyst Capital Group Inc, which earlier this year acquired a 16% stake in Hudsonís Bay and opposed Bakerís previous offer, was considering its next steps on Monday, according to a person familiar with the matter who requested anonymity to discuss confidential deliberations.
Another Hudsonís Bay shareholder with a smaller, undisclosed stake, activist hedge fund Land & Buildings, was against the deal on Monday because it considered the price inadequate, according to another source.
ďWe can only imagine there is a plan here to create substantial value once the company goes private, and that plan has only been shown to 57% of shareholders,Ē said Francis Casale, a former Hudsonís Bay director who owns about a 0.2% stake in the company and also opposes the deal.
Hudsonís Bay shares ended up 6.1% at $10.30 on Monday, below the deal price, indicating that most investors believed the deal would be voted through by shareholders.
An independent valuation report by real estate services firms CBRE Group Inc and Cushman & Wakefield Plc valued Hudsonís Bay real estate at $8.75 per diluted share, helping Bakerís push to convince the special committee to a deal closer to his offer.
Hudsonís Bay CEO Helena Foulkes had said last year the real estate could be valued at as much as US$28 per share.
The founding family of another North American department store operator, Nordstrom Inc, tried to take it private last year, but a special committee of the board rejected the US$8.4 billion offer.
While the completion of the take-private deal would be a victory for Baker, it would also represent the latest chapter of the companyís retreat from its ambitions to become a global retail powerhouse.
Baker, 53, a real estate developer who turned to the retail business early in his career, acquired Hudsonís Bay more than a decade ago through a private equity firm built by his father, Robert Baker.
When Baker invested in Hudsonís Bay, he believed that one of its holdings, Canadian discount chain Zellers, was highly valuable, according to people familiar with his thinking at the time.
After inciting a bidding war between Walmart Inc and Target Corp for Hudsonís Bayís Canadian discount chain Zellers, he inked a deal with Target for the stores.
ďHeís a tireless dealmaker Ö and a wonderful negotiator,Ē said Marc Cooper, CEO of investment bank PJ Solomon, who worked for Hudsonís Bay selling Lord & Taylor to start-up retailer Le Tote for US$100 million in August.
Baker took Hudsonís Bay public in 2012 with a US$365 million offering, and then completed a string of acquisitions, including Saks Fifth Avenue, now Hudsonís Bayís most profitable business, for US$2.9 billion.
The executive has visited stores owned by Hudsonís Bay around the world by private jet and often commutes to his office in downtown Manhattan by boat via the Hudson River from his home in Connecticut, people familiar with the matter said.
Hudsonís Bay is now focusing on its core businesses, Saks and the eponymous Hudsonís Bay department store chain in Canada.
ďWhat (Baker) didnít realize is how difficult it would be to run retail operations,Ē Cooper said.