The Governor and Executive Chairman of the Hudson's Bay Company Richard Baker During a Press Conference in Amsterdam the Netherlands 17 May 2016 the Canadian Department Store Chain Hbc Wants to Open Twenty Branches in the Netherlands in the Next Two Years Hudson Bay who Are Looking Into Buying Dutch Department Store Chain V&d Netherlands AmsterdamNetherlands Canada Economy Hudson's Bay - May 2016

It’s not business as usual for Hudson’s Bay Co.

Shareholders on Thursday approved the plan to take HBC private, bringing a different set of priorities to the Saks Fifth Avenue, Saks Off 5th and Hudson’s Bay operations, and possibly a better future for those businesses.

“It’s a great opportunity for us,” Richard Baker, HBC’s executive chairman and architect of the deal to go private, told WWD. “Retail is very transformational at the moment. Operating retail companies in the public market where shareholders demand growing EBITDA, cash flow and dividends is not the way to be transformational and reinvent. Putting Hudson’s Bay in a private setting is the way.”

“We’ve sold off the Lord and Taylor operating company, sold our assets in Europe, but we’ve kept a tremendous real estate portfolio and our two crown jewels, Saks Fifth Avenue and Hudson’s Bay. Now it’s our job to grow and improve those businesses.”

Among HBC’s near-term plans, continuing to elevate the image and luxury appeal of Saks Fifth Avenue, completing the final stages of the renovation of the Saks flagship, and somehow integrating Barneys New York into Saks Fifth Avenue. HBC has been licensed to the rights to the Barneys name, in the aftermath of Barneys getting lifted out of bankruptcy by Authentic Brands Group and liquidated by B. Riley.

Last Sunday, Barneys closed its Madison Avenue flagship after closing its other stores around the country.

In Canada, Hudson’s Bay is continuing to overhaul its vendor matrix to be “modern, upscale and slightly fashion-forward.”

And recently, HBC named new presidents for its Saks Off 5th and Hudson’s Bay chains, Paige Thomas and Iain Nairn, respectively.

Baker called going private “a de-leveraging event” and noted, “this go private [transaction] was funded with cash on our balance sheet, raised no debt, and we sold no equity. We had ample cash on hand in order to complete the transaction. The deal to go private is not a leveraged buyout.”

At the end of the third quarter, HBC had $2.8 billion of outstanding debt and $1.1 billion of cash. The company said net debt (which factors in cash) has declined 56 percent or $2.2 billion year-over-year due to the repayment and retirement of a $656 million term loan, eliminating the $512 million Lord & Taylor mortgage and the balance of cash proceeds from our European transaction.

The cash for the go-private deal was largely raised through the sale of Hudson’s Bay retail and real estate holdings in Germany. Some shareholders had objected to using those funds to go private but backed away as Baker, partnering with a group of like-minded stakeholders who all together represented 58 percent of the shares of company, raised their offer to buy out the minority shareholders. Baker’s group includes Rhône Capital LLC; WeWork Property Advisors; Hanover Investments (Luxembourg) S.A., and Abrams Capital Management LP.

Initially, the group in June 2019 offered 9.45 Canadian dollars per share to take HBC private. Last October, the offer was raised to 10.30 Canadian dollars, and subsequently raised to 11 Canadian dollars, matching the offer from Catalyst Capital, an activist investor.

To take the company private, the group needed to win the approval of a majority of the 42 percent of shares they did not already own and get Catalyst on board.

On Thursday, the plan was approved by 98.28 percent of the shareholder votes cast, including 94.46 percent of the votes cast by common shareholders.

The deal is subject to approval in Ontario Superior Court of Justice, expected Friday, and customary closing conditions. It could close as soon as Tuesday. The company will be privately owned by Baker and his group of investors.

Going private has certain advantages. It’s easier to plan for the long term, build enduring strategies and worry less about short-term quick fixes. There is less scrutiny, fewer regulations to adhere to and deals involving acquisitions and selloffs could happen faster. But it can be harder to raise money for expansion or other projects and place a value on a company.

“Now that HBC will be a private company, it has a stronger balance sheet and better financial capability that might allow it to more seriously consider acquiring other companies,” one industry source said.

Baker, a deal-maker at heart, has long been interested in buying Neiman Marcus Group while also owning Saks Fifth Avenue. The two retailers together would dominate the luxury retailing sector in the U.S., and could be more profitable given the buying power, back office synergies, cost savings and talent attained through the combination.

Baker and the owners of NMG, Ares Management and the Canada Pension Plan Investment Board have been in and out of talks for years. Another source said the go-private scenario has revived talks between the parties. Baker would not comment on that report.

There is also speculation that if Baker doesn’t buy Neiman’s, Saks could be sold to the Neiman Marcus Group, though NMG is heavily in debt.

As a private company, HBC will no longer publicly disclose its quarterly results. In the third quarter, sales tallied 1.82 billion Canadian dollars from 1.86 billion Canadian dollars a year ago, with a 1.7 percent comparable sales decrease. Earnings before interest, taxes, depreciation and amortization declined to 40 million Canadian dollars from 84 million Canadian dollars a year earlier. There were some bright spots. Saks Off 5th sales grew 4.9 percent as digital sales increased 15 percent.

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