NEW YORK — Hudson’s Bay Co., led by Richard Baker, chairman and chief executive officer, has emerged as a serious contender to purchase Saks Inc., which has been in play for about a month.

This story first appeared in the June 24, 2013 issue of WWD. Subscribe Today.

Baker and his team have been busy working on a deal and have been utilizing Hudson’s Bay’s U.S. headquarters at 15 West 39th Street, at the Lord & Taylor flagship, as a base to conduct due diligence and strike a deal, according to industry sources.

However, sources said Saks might be considered expensive at the current price of its stock, which closed on Friday at $13.39 with a market cap of $1.94 billion, since for the past decade it’s mostly languished in the $11 range. Others costs, like compensating departing Saks executives with change-of-control payments and paying bankers, would raise the price further.

The next couple of weeks will be decisive, the sources said.

“Hudson’s Bay has never paid full price for anything,” said one source. “They are bargain hunters.”

Still, there’s logic to a Hudson’s Bay-Saks hookup. For one, Baker has long been interested in purchasing Saks and in past years has met with Saks management to discuss the possibility.

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Secondly, Hudson’s Bay could open Saks Fifth Avenue stores and Saks Off-5th outlets in Canada. Hudson’s Bay would consider converting some of its stores to Saks, or in the U.S., Lord & Taylor could take some Saks locations or vice versa. Saks owns some prime real estate, including the Fifth Avenue flagship, and in Canada, retailers, including Canadian Tire Corp. and Loblaw Companies Ltd. have been spinning off real estate into real estate investment trusts. Hudson’s Bay has not been shy about the possibility of a REIT, as well. Baker paid off the debt from the L&T and Hudson’s Bay acquisitions by selling the leases of 188 Zeller stores to Target Corp.

Putting Saks and Hudson’s Bay together would create synergies and cost savings involving consolidating staff, back-office functions and Internet operations. The Toronto-based Hudson’s Bay Co. operates 90 Hudson’s Bay stores and 69 Home Outfitters stores across Canada, and 48 Lord & Taylor stores and three L&T outlets in the U.S.

Some private equity firms, such as Thomas Lee and Leonard Green, have been kicking the tires of Saks and it is believed Middle Eastern sovereign wealth funds are interested, as well, and could outbid Hudson’s Bay, though one industry source said there is not widespread interest in buying the department store chain.

Last week, Baker reorganized his top management at Hudson’s Bay, naming Bonnie Brooks vice chairman and Liz Rodbell president, succeeding Brooks, raising speculation that Hudson’s Bay was pursuing Saks. “He’s close to a Saks deal so he couldn’t risk losing Brooks and had to promote Liz to stabilize the management,” said one source. Brooks and Rodbell are veteran merchants and would be indispensable if Hudson’s Bay bought Saks.

Also last week, at Hudson’s Bay’s annual meeting, Baker said the retailer can offer the same brands carried at Saks, Macy’s and Kohl’s, and that on the merchandising front, “the future opportunities at Hudson’s Bay are huge.”

Goldman Sachs is working on strategic alternatives for Saks, to maximize shareholder value, including a possible sale of the company. Though Saks stock has generally languished for years, only perking up when Goldman Sachs came into the picture for a possible sale, the company has lately been performing better and weeding out weak stores.

Hudson’s Bay officials declined comment.