Retailer Saks Inc. agreed to be bought by Hudson’s Bay Co. HBC.T +0.18% for $2.4 billion, in an all-cash deal that is probably as much about high-end real estate as luxury clothes.
Hudson’s Bay agreed to pay $16 in cash per Saks SKS +3.40% share—a 4.5% premium to the retailer’s $15.31 Friday closing price.
The acquisition of Saks caps a seven-year run of deal-making for Hudson’s Bay Chief Executive Richard Baker, a longtime real-estate investor. He plunged into the apparel business in the middle of the last decade with the acquisition of Lord & Taylor and a chain of department stores in Canada.
The deal not only adds a high-end luxury chain to his collection of brands but also gives him a lot of real-estate options, including a trophy property on Manhattan’s Fifth Avenue.
As of the end of its last quarter, Saks operated 42 Saks Fifth Avenue stores and 66 outlet stores. Deborah Weinswig, a Citigroup Inc. analyst, valued the fleet of stores at $1.5 billion, including $805 million for the flagship New York location.
Saks, for instance, still has a number of stores in unprofitable locations. By swapping Saks Fifth Avenue stores in lower-end malls for the more moderately priced Lord & Taylor, Mr. Baker could alleviate Saks’s real-estate problems at little cost, a person familiar with his plans said.
Mr. Baker also could expand the Saks chain to Canada without signing expensive new leases by putting it into Hudson’s Bay real estate, this person added.
Saks’s shares have climbed nearly 46% so far this year, largely on speculation that it could be bought. That increase has given it a market capitalization of more than $2.2 billion.
Sales at Saks have yet to fully recover from the deep swoon they took during the recession, and profits have been uneven. Saks posted net income of $63 million in the year that ended Feb. 2 on $3.15 billion in sales. Its sales increased from a year earlier but its earnings declined.
Hudson’s Bay was advised by Bank of America Merrill Lynch, with financial advice by RBC Capital Markets. Goldman Sachs, Morgan Stanley and Guggenheim Securities advised Saks. (WSJ)
By SHARON TERLEP And SERENA NG CONNECT
—Suzanne Kapner contributed to this article.
