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Saks Fifth Avenue could open up to seven full line stores and 25 Off-5th outlets in Canada, according to Richard Baker, chief executive officer of Hudson’s Bay Company, which today revealed a definitive agreement to buy Saks for $16 a share, or $2.9 billion, including debt.
Share of Saks jumped 3.7 percent to $15.87 by 11:00 a.m. on Wall Street. Almost 40 million shares traded hands in about an hour and a half, well ahead of the 2.7 million daily average for the last three months. On the Toronto Stock Exchange, shares of Hudson’s Bay increased 7.4 percent to $17.71 Canadian, or $17.22.
“We are going to move as quickly as we can,” Baker said in reference to bringing Saks to Canada, where HBC is based. “There is a lot of opportunity to accomplish that rollout very quickly,” Baker said, during a conference call. With Nordstrom already announcing locations in Canada for full-line and Rack outlets, HBC has a sense of urgency about bringing Saks to Canada as soon as possible.
Baker also said HBC would be investigating the possibility of a real estate investment trust (REIT) involving properties in the U.S. and Canada, operated by the Saks, L&T and Hudson’s Bay department store chains. “We will work on it as expeditiously as we can,” he said. The REIT, he noted, would help de-leverage the company and maximize the value of the real estate assets. Key owned Saks properties include the New York Fifth Avenue flagship and the Beverly Hills, Calif., Chevy Chase, Md. and Bala Cynwyd, Pa. stores.
The combined company will operate 320 stores, including 179 full-line department stores, 72 outlet stores and 69 home stores, representing 32 million square feet, including 17 million square feet that is owned or ground leased. HBC said the combined company would have generated pro forma sales of $7.2 billion Canadian, or $6.98 billion, and normalized earnings before interest, taxes, depreciation and amortization [EBITDA] of $587 million Canadian, or $569.4 million, in fiscal 2012. HBC expects to achieve $100 million Canadian, or $97 million, of annual synergies within three years, through the merger.