Shareholders on both sides of Hudson’s Bay Co.’s proposed buyout of Saks Inc. were happy Monday.
Investors pushed Hudson’s Bay’s stock up 5.8 percent to 17.45 Canadian dollars, or $16.97, on the Toronto Stock Exchange — a big vote of confidence given the risks of integrating another department store business into the company’s portfolio and taking on additional debt. Saks’ stock increased 4.2 percent to $15.95. A total of 66.7 million Saks shares traded hands, well above the 2.7 million daily average for the last three months.
Under the terms of the deal, Saks has 40 days to try to find a better offer.
Paul Trussell, an analyst who follows Saks at Deutsche Bank, said the purchase price of $16 a share, or $2.9 billion including debt, was a “fair price” and that investors have been frustrated by Saks’ stock price for years.
“Their valuation was grouped a bit more with the national department store chains — Macy’s, Kohl’s and Penney’s — and [Saks’ shareholders] were probably seeking something closer to a luxury brand multiple, which it was not getting in the marketplace,” Trussell said.
The analyst said Saks, under the Hudson’s Bay umbrella, would be able to more easily expand into Canada, cut back on costs and realize the value of its real estate.
The ultimate selling price of Saks was a subject of much debate in recent weeks, with some estimates going as high as $19 a share. The companies noted that the purchase price represented a roughly 30 percent premium over the company’s closing price on May 20, before word began to spread that Saks was looking for a buyer.
“The $16 offer price is at the high end of the $15-to-$16 range that we suspected an acquirer would be willing to pay,” said Deborah Weinswig, an analyst at Citi.
Weinswig noted it was unlikely that a higher bid would come in and that Saks was a good strategic fit for Hudson’s Bay.
“You’re going to have a stronger Saks,” she said. While the brand had been looking to shrink its store base, it now appears to be reversing course.
“[Saks] could end up giving Neiman’s a run for their money,” Weinswig said, noting that Hudson’s Lord & Taylor division could also pick up its game and learn something from Saks. “There’s a bigger master plan here, where you could see a bigger competitive impact than we’re thinking about right now.”
Matthew Boss, an analyst at J.P. Morgan, said the buyout carries an implied multiple of 11.4 times earnings before interest, taxes, depreciation and amortization for the past 12 months.
Boss said that’s better than the average retail multiple for the past 10 years of 9.5 times EBITDA, and added that the premium was “reasonable given substantial underlying real estate value…and an underearning financial model.”
The analyst said the acquisition would increase the Canadian company’s scale in buying and distribution and improve Hudson’s Bay’s “competitive positioning in the midtier and luxury channels.”
The biggest winners in the deal could be Saks’ top shareholders — Mexican billionaire Carlos Slim Helú, who holds 23.1 million shares, and Tod’s chief Diego Della Valle, who owns 22.7 million shares. The takeover values Slim’s stake at $369.6 million and Della Valle’s at $363.2 million.
With the go-shop provision, they have at least a chance at a bigger payday.
Rick Snyder, senior analyst at Maxim Group, said Hudson’s Bay’s bid undervalues Saks and that there was a “reasonable chance” of another bidder emerging.
Snyder said the brand’s positioning and its omnichannel opportunities should garner $18.50 a share. He noted there are 35 geographic areas within the U.S. that could support Saks stores and that omnichannel selling “allows Saks to reach the smaller clusters of these customers without the expense of having a store.”
Walter Loeb, retail consultant and former Wall Street analyst, said, “I believe it will be operated as a separate company, as it is not easy to merge it either with Lord & Taylor or The Bay. I also think a Saks boutique can be opened in several of The Bay stores, giving exposure to the Saks nameplate.”
Loeb wasn’t sure if full-fledged Saks stores would work in Canada. “I was a trustee at Hudson’s Bay Co., and the Canadian customer is different from the American consumer in terms of shopping habits,” he said. “They are more frugal. That’s why Saks boutiques would make more sense, as it could help attract more upscale customers to The Bay.”
Loeb said the Saks name could be exported throughout the world. The retailer already has stores in the Middle East.
As for whether a higher price could be had from others during the 40-day go-shop period, Loeb said, “No, not higher; $16 a share is about as much as I would expect.”
Bank of America Merrill Lynch and RBC Capital Markets advised Hudson’s Bay on the transaction, while Saks worked with Goldman Sachs, Morgan Stanley and Guggenheim Securities.
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews
“Stranger Things” is getting a new cast member for season 2. Meet @sadiesink_, the 15-year-old who will be joining the Netflix series for its new season. You may recognize her from “The Glass Castle” with Brie Larson and Woody Harrelson, but the Texas native’s next role goes in an entirely different direction. She describes her character, Max, as “a rough and tumble skater girl [who] becomes friends with the boys at school.” The second season debuts on October 27. (📷: @jgreenery) #wwdeye
Amid the Harvey Weinstein controversy, there’s another sector that’s being put under the spotlight for sexual abuse: the modeling industry. While rumors about abuse and sexual harassment of female and male models — and the photographers, agents and others who perpetrated it — have circulated within the fashion world for years, model @cameronrussell started posting stories from models on Instagram last week about abusive situations they’ve encountered — from sexual harassment and molestation to attempted rape. Over 75 have weighed in so far. Read more on WWD.com. Link in bio. #wwdnews
To celebrate its 16th anniversary, @dylanscandybar tapped designers and celebrities to create mosaics out of candy. The mosaics will be auctioned off to support the philanthropic cause of each participant’s choice. Pictured here is the mural created by @aliceandolivia's Stacey Bendet. For a first look at some of the other artwork being unveiled tonight, go to WWD.com. #wwdeye
The annual Veuve Clicquot Polo Classic in Pacific Palisades this weekend drew Kate Hudson, Tracee Ellis Ross, Laura Dern and more. See pictures of the star-studded event on WWD.com. (📷: @chelsealaurenla) #wwdeye
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye