Are Hudson’s Bay Company and Saks Right For Each Other?
It's a deal that may never come to pass, but there are plenty of people who seem to think that Saks could do a lot worse than being acquired by Hudson's Bay Co. (HBC), owner of the iconic Canadian department store by the same name and Lord & Taylor here in the U.S.
If a deal were completed, it would give the American chain several potential entryways into Canada including opening Saks shops inside HBC stores, converting some HBC locations to Saks Fifth Avenue flagships or its Off Fifth discount outlets. As with all deals of this type, synergies and costs savings are being run out as additional reasons for HBC to acquire Saks.
Reports on The Globe and Mail website as well as WWD.com, which cite unnamed sources with knowledge of the dealings, suggest Saks' asking price may be too rich for HBC management's blood even though company chairman and CEO Richard Baker has had a long interest in the department store chain.
The WWD piece points to a top management reorganization last week at HBC as another sign of its interest in Saks. Bonnie Brooks, president of HBC, was named its vice chair, while Liz Rodbell, executive vice president, chief merchant for HBC, was promoted to president.
"He's (Mr. Baker) close to a Saks deal so he couldn't risk losing Brooks and had to promote Liz to stabilize the management," an unnamed source told WWD.
- Hudson's Bay eyes buying Saks –The Globe and Mail(tiered sub.)
- Owner of Hudson's Bay Explores a Deal to Buy Saks – The New York Times (tiered sub.)
- Saks Draws Interest From Hudson's Bay – The Wall Street Journal(sub. required)
- Hudson's Bay Co. Zeroes In on Saks Inc. – WWD.com (sub. required)
- HBC Announces Changes in Executive Structure – Hudson's Bay Company/Globe Newswire/NASDAQ
Discussion Questions
Is Hudson’s Bay Company the right party to acquire Saks? What do you think HBC will do if it succeeds in acquiring Saks?
Select retail brands have a brighter future as part of a Localized Globalization strategy. Saks is one of those firms that deserves to release itself from a New York-centric view.
Hudson’s Bay Company would help them to do it.
“…Converting some HBC locations to Saks Fifth Avenue flagships or its Off Fifth discount outlets.” Such as? The Bay—as it was known utill last year—owns enormous stores in the downtowns of major Canadian cities (and progressively smaller stores in smaller cities) and I can’t envision even one that would make a suitable conversion (save perhaps one of the suburban Toronto locations…hardly a viable strategy). Also, with Holt-Renfrew expanding and Nordstrom set to enter the market, the upscale segment in Canada should have competition galore. And finally, what, exactly, would become of L&T, (presumably) now to be relegated to second billing?
Curiously, I happened to be reading HBC’s Annual Report yesterday, and among other things I learned that the company is 80% owned by a Luxembourg-based holding company. While it would be rash to base an entire analysis on such a factoid—and with all due respect to the Duchy—I couldn’t help but hear in my head the admonition offered here last week that activist owners are killing retail.
It’s not a bad match. HBC has seen some success with their “store within a store” concept, particularly with the UK’s Top Shop. The acquisition will facilitate HBC launching Saks in Canada, which is proving to be attractive to many US based retailers (Target, Nordstrom).