Hudson’s Bay Company (HBC), a Canadian corporation, has inked a definitive merger agreement to acquire American department store chain Saks for $2.9bn.

The transaction, which will bring together three iconic retail brands Hudson’s Bay, Lord & Taylor and Saks Fifth Avenue, is said to be a part of company’s strategy to expand its business in North America.

HBC chairman and CEO Richard Baker said that the company is thrilled to add one of most recognized luxury retailers to its corporate portfolio.

"With the addition of Saks, HBC will offer consumers an unprecedented range of retailing categories and shopping experiences," added Baker.

"This acquisition will increase our growth potential both in the U.S. and Canada, generate significant efficiencies of scale, add to our powerful real estate portfolio and deliver substantial value to our shareholders."

The combined entity will own 320 stores, including 179 full-line department stores, 72 outlet stores and 69 home stores across the US and Canada, along with three e-Commerce sites.

The retailer is expecting annual synergies of around C$100m within three years through a combination of operational efficiencies across banners and back-office consolidation.

HBC is also keen launch Saks into Canada through full-line, outlet and online formats, leveraging, alongside expanding OFF 5TH in the US.

Saks chairman and CEO Steve Sadove noted: "We believe this transaction delivers compelling value to our shareholders and that Saks Fifth Avenue is an excellent fit within the HBC organization."

The transaction is expected to close before the end of 2013, subject to approval by Saks shareholders, regulatory approvals and other customary closing conditions.