1. News
June 11, 2019

HBC to sell remaining stake in German real estate

Canadian retail business group Hudson’s Bay Company (HBC) has entered into agreements to sell its remaining stake in the German real estate joint venture and divest its related retail joint venture, to its partner Signa for a total consideration of $1.5bn (€1bn).

Canadian retail business group Hudson’s Bay Company (HBC) has entered into agreements to sell its remaining stake in the German real estate joint venture and divest its related retail joint venture, to its partner Signa for a total consideration of $1.5bn (€1bn).

The company said that it will use part of the proceeds to strengthen its balance sheet by repaying its outstanding $436m term loan.

HBC CEO Helena Foulkes said: “This agreement is an exciting milestone for HBC as it will deliver important financial and strategic benefits.

“Financially, it provides us with the best opportunity to capitalise on our German real estate and allows us to further strengthen our balance sheet.

“Strategically, we will be able to fully focus our resources on HBC’s North American operations, including our best growth opportunities – Saks Fifth Avenue and Hudson’s Bay.”

HBC will take over the Netherlands retail business and release Signa from its 50.01% back-to-back guarantee of certain obligations of Hudson’s Bay Netherlands. Signa will take over German liabilities from HBC.

“This agreement is an exciting milestone for HBC as it will deliver important financial and strategic benefits.”

HBC has appointed a financial advisor to review options for the Netherlands business, which has not performed satisfactorily. The company also expects to close some stores as part of cost savings initiatives.

Subject to regulatory approvals and customary closing conditions, the transaction is expected to close in 2019.

At the signing of the agreement, Signa delivered a deposit of $150m (€100m). JP Morgan Securities acted as exclusive financial advisor to HBC on the transaction.

HBC also said that the board of directors has formed a special committee to review a proposal from a group of shareholders on 10 June 2019, for the privatisation of the company, at a price of C$9.45 per share payable in cash.

The group of shareholders, includes governor and executive chair of HBC Richard A Baker; Rhône Capital; WeWork Property Advisors; Hanover Investments (Luxembourg); and Abrams Capital Management.

The proposed transaction represents a premium of 48% to HBC’s closing share price on the Toronto Stock Exchange on 7 June 2019 and a premium of 39% to its 20-day average closing price.

The special committee has appointed Blake, Cassels & Graydon as legal counsel and JP Morgan Securities as financial advisor to assist in its review.