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BRAMPTON, Canada — Canadian department-store company Hudson's Bay Co. faces an unsolicited bid for its main European asset a week after the struggling Canadian department-store operator sold an iconic Manhattan store to reduce debt.
The owner of Saks Fifth Avenue said on Wednesday that it received “an incomplete, non-binding and unsolicited offer with no evidence of financing” from Signa Holding GmbH to buy its German Kaufhof business, just two years after purchasing the chain. It said the board would review the offer “in due course.”
“As we’ve previously stated, our European business is an important element of the company’s strategy,” Toronto-based Hudson’s Bay said in a statement.
A sale would help further bolster the company’s balance sheet in the wake of the October 24 deal but also drastically shrink the size of the retailer, which gets about a third of its revenue from Europe. Hudson’s Bay, which is in search of a new chief executive, has been cutting thousands of jobs as it copes with an industrywide slump for department stores. It said earlier this week it was considering putting its prime location in Vancouver on the market.
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Bloomberg reported earlier that Signa submitted a fully financed bid of €3 billion ($3.49 billion) for the German chain and expects a response from Hudson’s Bay by November 15, citing a person familiar with the matter, who requested anonymity because the offer hasn’t been made public. Hudson’s Bay bought Kaufhof for €2.83 billion in 2015.
Hudson’s Bay shares rallied as much as 11 percent to C$12.54 ($9.78) in Toronto Wednesday. They had declined 15 percent through Tuesday’s close.
Failed Bid
Signa tried to buy Kaufhof in 2015 but lost out to Hudson’s Bay. Kaufhof’s then owner Metro AG agreed to the sale after years of sub-par profitability. The main value in the deal were Kaufhof’s properties, which include stores in Germany’s most famous shopping areas.
Kaufhof is no longer the hallmark of Germany’s inner cities that it once was, but gave the Canadian company a foothold in Europe, where it’s opening Saks and Hudson’s Bay stores. The retailer also has a renovation program underway at Kaufhof, which includes building “stores within stores.” Still, comparable sales on a constant currency basis slipped 2.8 percent at Hudson’s Bay Europe unit in the quarter through July 29.
Hudson’s Bay is also under pressure from activist investor Jonathan Litt of Land & Buildings Investment Management, who is urging the company to monetize some of its real estate holdings.
In a statement Wednesday, Litt urged shareholders to “seriously consider” the Signa offer, calling it “the optimal and lowest-cost option for raising capital.” The offer “further underscores the real estate value of the company,” he said.
Under the agreement announced last week, Hudson's Bay will sell its Lord & Taylor building in Manhattan and unload a minority stake to a private equity firm. The deal will help the retailer cut debt and boost cash by about C$1.6 billion ($1.2 billion). Chairman and interim chief executive Richard Baker said the deals will generate $385 million in cash and slash debt excluding mortgages to $500 million. This compares with the company's $1.5 billion in current loans, according to data compiled by Bloomberg.
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Signa’s offices were closed Wednesday for a holiday in Austria and the company didn’t respond to a request for comment.
Reuters was first to report Signa’s offer for Kaufhof.
By Scott Deveau and Sandrine Rastello, with assistance from Richard Weiss and Allison McNeely; editors: Nick Turner, Jonathan Roeder and Lisa Wolfson.
