July 29 - The owner of Lord & Taylor is buying Saks, getting prime real estate and a luxury brand to add to its mid-tier lineup. Fred Katayama reports.
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The Canadian owner of the Lord & Taylor department store chain is buying the iconic luxury retailer, Saks. Hudson's Bay Company will pay $2.9 billion in cash. Combined, HBC will run 320 stores, including its The Bay chain in Canada, that will give it access to luxury, mid-tier and outlet stores.
Run by a real-estate magnate, HBC will get prime property: Saks' Fifth Avenue location in New York and Wilshire Boulevard in Beverly Hills, and it will introduce Saks into Canada. The Wall Street Journal says HBC could swap unprofitable Saks stores in low-end malls with its Lord & Taylor stores. Hit hard by the recession, Saks sales are only now returning to levels before the downturn.
The $16 purchase price is a 4.5 percent premium over its Friday closing price. But it's a 30 percent premium over its price in May when media speculation over a sale began. Those rumors boosted the stock nearly 46 percent this year.
But HBC's price could spark a bidding war.
Maxim analyst Rick Snyder wrote last week, "We view our $18.50 price target as the minimum that Saks shares should fetch given the unique marketing position. We also believe that Saks could be extremely attractive for a strategic buyer." But a JP Morgan analyst says the price is reasonable because the premium is higher than the average retail deal.
Saks has 40 days to solicit bids from other parties.
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