Is Hudson’s Bay Co. trying to sell Lord & Taylor to Von Maur, the Midwestern department store chain?
Richard Baker, Hudson’s Bay executive chairman and governor, says absolutely not, disputing market sources who indicated some talks were held.
“WWD is incorrect in the report. Hudson’s Bay is not selling Lord & Taylor to Von Maur,” Baker stated.
The family-run Von Maur business would primarily be interested in several Lord & Taylor locations, rather than all of them, but the sources said no deal, in any case, is imminent.
“I’m always listening,” said Jim von Maur, president of Von Maur, when asked if there was interest in Lord & Taylor. He declined to discuss the extent of his conversations with Baker.
Baker has been approaching other companies to sell off Lord & Taylor. Sycamore Partners, the private equity firm specializing in retail and consumer investments, would be among them. Sycamore owns Belk Inc., the Charlotte, N.C.-based department store chain concentrated in the South.
Last May, HBC said a sale, joint venture or a merger of Lord & Taylor with another company are all possibilities. HBC executives also said strategic alternatives involve the retail operating business of Lord & Taylor. Ideally for Baker, he would sell L&T’s operating business while retaining certain real estate and becoming a landlord to a new L&T operator. But it’s also possible that L&T is sold off in pieces to different retailers.
Among L&T’s most valuable locations owned by HBC are the Garden City, Manhasset and Scarsdale units in New York; the Westfield and Ridgewood, N.J., units, and the store in Stamford, Conn.
“If anyone can make a deal, Richard can,” said someone familiar with the company. “Lord & Taylor’s freestanding locations are very valuable.”
The division operates 45 stores, mainly in the Northeast. The Toronto-based retailer has hired the PJ Solomon financial advisory firm to assist in the process.
Von Maur is a rarity in the retail business — a midsized independent department store chain. Moreover, it’s been opening stores at a time when much larger national department stores have been streamlining. Over the last several decades, most independent department stores either closed or were consolidated into publicly held retailers.
Von Maur is based in Davenport, Iowa, where the company started with a small downtown store. It now operates 35 units in 15 states as well as a chain of junior retail stores, Dry Goods. Both are growing.
Meanwhile, HBC is moving closer to deciding on an offer to go private.
On Thursday, HBC’s special committee of the board said it’s soliciting a number of shareholders to share their views regarding the privatization proposal led by Baker with the committee and its financial advisers in the coming weeks. Baker, along with a group of HBC shareholders, on June 10 offered to take HBC private at a price of $9.45 cash, in Canadian dollars. The offer values HBC’s stock at 1.7 billion Canadian dollars, or $1.28 billion. Baker’s group owns 57 percent of the firm’s shares, and to compete a deal needs a majority of the holders of the remaining 43 percent of the stock to agree.
The special committee is considering “other strategic alternatives” as well as an unsolicited offer by Catalyst Capital Group Inc. to acquire up to 14.8 million common shares of the company for $10.11 per share in cash, Canadian dollars. The stock of the Toronto-based HBC closed Thursday at $9.94.
The special committee did not specify what strategic alternatives would be considered.
HBC has been aggressively downsizing and cutting costs to shore up its balance sheet, including selling off certain divisions and real estate holdings and closing some stores.
Last year, the company sold off both a majority interest in its European retail operations to Signa Holdings, which owns the Karstadt department store chain in Germany, and a 50 percent stake in its European real estate. The sale to Signa led to a merger of the Kaufhof and Karstadt department stores chains in Germany. The proceeds of these transactions would be used to help Baker and his group buy out other shareholders.
This year, HBC announced the closing of its Home Outfitters chain in Canada and will close up to 20 Saks Off 5th stores in the U.S. The Saks Off 5th chain, which operates 133 off-price stores, has been yielding poor results for several seasons. HBC said it is performing “a fleet review” of Saks Off 5th.
Last year, HBC sold off the Gilt Groupe. Also, the Lord & Taylor flagship building on Fifth Avenue was sold last year to WeWork for $850 million.
The special committee has retained TD Securities Inc. as an independent valuator to prepare a formal valuation of the common shares and has retained J.P. Morgan Securities as financial adviser; Centerview Partners LLC as special adviser, and Blake, Cassels & Graydon LLP as legal counsel to assist in its process. It has also engaged real estate appraisal firms and planning consultants to assist in valuing HBC’s real estate assets.
Activist Jonathan Litt of Land & Buildings Investment Management already called the buyout offer “woefully inadequate” and asked the special committee to consider other options.