Winnipeg Free Press

Winnipeg Free Press (Newspaper) - July 30, 2013, Winnipeg, Manitoba C M Y K PAGE B4 BUSINESS EDITOR: SHANE MINKIN 204- 697- 7308 business@ freepress. mb. ca I MARKET DETAILS B5 I winnipegfreepress. com TUESDAY, JULY 30, 2013 B 4 T ORONTO - Luxury U. S. retailer Saks will soon open its doors in Canada with plans to launch up to seven stores north of the border, after being snatched up Monday by Hudson's Bay Co. for US$ 2.9- billion. In addition to expected operational savings of about $ 100 million and a portfolio of prime U. S. real estate, one analyst said the deal will give HBC greater fashion credibility. " Saks is such a revered name in fashion," said Wendy Evans of Evans and Company Consultants Inc. in Toronto. " It's been around for a long, long time - since the 1920s. There's an aura about it." Evans said the deal will broaden the selection of premium brands available to Canadians, including the in- store Saks line, and will also give HBC access to some of the retailer's designers. The high- end U. S. department store chain carries brands such as Gucci, Prada, Giorgio Armani, Chanel, Louis Vuitton and Dolce and Gabbana. Richard Baker, HBC's chairman and chief executive, didn't provide a timeline for the launch. " We're going to move as quickly as we can," he told analysts during a conference call Monday. Saks currently operates 42 stores across the U. S., while HBC's holdings include 90 Hudson's Bay stores and 69 Home Outfitters in Canada. HBC also owns 48 Lord & Taylor luxury retail stores in the U. S. Northeast. Together, the combined company will comprise more than 32 million square feet of retail space and rake in about C$ 7.2 billion of sales annually. HBC said it may transform some of its Hudson's Bay stores into Saks locations, open new Saks stores in existing buildings or, in some cases, build new stores from the ground up. HBC spokesperson Tiffany Bourre confirmed in an email the company plans to open up to seven full- line Saks stores and up to 25 Saks Off Fifth locations in Canada. " We are looking at major centres across Canada, and Winnipeg will be part of this review," she added. She sidestepped a question about whether HBC might consider putting a Saks outlet inside its existing six- storey downtown HBC store, which is more than half empty. HBC and local government and real estate industry officials have been trying for nearly a decade to come up with a redevelopment plan for the massive historic building. One of the options that had been bandied about was putting a number of HBC's retail brands under the same roof. " There are no new updates with regard to the building," Bourre said. " However, we continue to discuss options for the property." One of the city's leading real estate developers - Shindico Realty Inc. president Sandy Shindleman - tried unsuccessfully for three or four years to find new tenants for the downtown store. He said Monday that while he thinks Winnipeg has a shot at landing one of the Saks Off Fifth discount outlets, he doesn't think HBC would put it in its downtown HBC store because the floor plate there - 80,000 square feet per floor - is just too big. He said a Saks store wouldn't need even half of one floor. A more likely location is the Polo Park area, he said, where HBC already has a Hudson Bay and a Home Outfitters store. So putting a Saks in the same area would give HBC customers another reason to go there. Shindleman said HBC officials will consider the new retail centre Shindico and Polo Park Shopping Centre owner Cadillac Fairview are building on the former Canad Inns stadium site immediately north of the existing shopping centre. " We will certainly be putting our oar in the water," he added. Even if the downtown HBC store doesn't get a Saks outlet, Shindleman said it could still benefit from the acquisition because it gives HBC added buying power. " So it might be easier to operate a store in downtown Winnipeg," he added. Shindleman said the Saks deal is also good news for the Canadian real estate industry because it reaffirms HBC's commitment to the Canadian market. For some Canadian shoppers, news of the upscale chain's foray into Canada, was overdue. Adrian Salamunovic, a business owner who lives in Ottawa, said he's been shopping at Saks for about seven years. Salamunovic, 37, was thrilled to hear Saks will be opening up to 25 of its Saks Off Fifth outlet stores in Canada, which sell designer brands at discount prices. Salamunovic said he often visits these stores when he's staying at his second home in Los Angeles to pick up brands such as Vince, John Varvatos and the Made & Crafted line by Levis - all of which he says are difficult to find in Canada. Paul Swinand, an analyst with Morningstar in Chicago, said the prime real estate portfolio was likely one of the biggest draws for HBC. " There's no way they could have accessed these real estate assets at any other price, or in any other way," said Swinand. " These are assets in locations where you couldn't get that size of a store otherwise." The Toronto- based retailer is also eyeing the possibility of starting a real estate investment trust. " The combination of Saks and HBC real estate creates an unmatched, highly valuable North American retail real estate portfolio, with a coast- to- coast footprint serving three strong banners," Baker said. Baker said HBC will keep the stores under separate banners, and plans on renovating the Saks stores and working with more vendors to make the chain " as luxurious as possible." " We think that Saks is very well positioned in the luxury market in the United States, but we think there's a great opportunity to improve that positioning," he said. HBC, which has been eyeing the struggling high- end American chain for the past few months, said it will pay US$ 16 per Saks share plus assume debt as part of the transaction. It will issue US$ 1 billion worth of equity and $ 2.3 billion of debt securities to pay for Saks. Hudson's Bay Co. will also issue US$ 1.9 billion of secured loans and US$ 400 million of unsecured notes. Saks will pay a fee to HBC if the deal doesn't go through, but HBC would not specify the amount. - The Canadian Press, with files from Murray McNeill Retailer's storied history KEY dates in the history of the Hudson's Bay Company: 1666: French explorers Pierre- Esprit Radisson and Medard Chouart travel to London with tales of wilderness riches and attain the sponsorship of Prince Rupert, cousin of King Charles II. Four years later they bring their first cargo of fur to England from the Hudson Bay region. May 2, 1670: King Charles grants The Governor and Company of Adventurers of England Trading into Hudson's Bay a monopoly over the vast region whose rivers end at Hudson Bay. 1779: After a century of building forts and exploring and trading inland and northward, the company gets a competitor: the North West Co. of Montreal. 1780: The iconic Hudson's Bay point blanket is produced for the first time. 1821: HBC and North West Co. merge under the Hudson's Bay name, with 173 trading posts in 7.8 million square kilometres of land. 1869: The company's territory, Prince Rupert's Land, is turned over to the government of Canada, in exchange for Prairie land and 300,000 pounds in cash. Early 1900s: Hudson's Bay continues expansion by building a chain of stores in western Canada. 1960: The company begins eastward expansion by taking over Montreal- based Morgan's department stores, converting Ontario locations to The Bay banner but leaving Quebec stores as Morgan's until 1972. 1964: Hudson's Bay Co. stores are rebranded under The Bay banner. 1978: The company acquires the Zellers discount chain. 1979: Hudson's Bay expands further with the acquisition of Simpsons department stores. HBC itself is bought by the Thomson family, outbidding George Weston Ltd. for a 75 per cent share of the business. 1987: The company sells its Northern Stores division and officially stops dealing in fur pelts. 1990: Towers stores are added to the retail portfolio under the Zellers banner. 1993: HBC acquires Woodward's stores in B. C. and Alberta and converts most to Bay or Zellers locations. 1997: Thomson family relinquishes ownership of the company 2003: U. S. businessman Jerry Zucker starts accumulating holdings in HBC, and two years later bids $ 1.1 billion to acquire the company, making it a private enterprise. April 12, 2008: Zucker dies after a battle with cancer. July 16, 2008: New York- based NRDC Equity Partners, owner of American department store chain Lord & Taylor, buys Hudson's Bay, with plans to expand its brand into Canada and give a fresh approach to both The Bay and Zellers outlets. Jan. 13, 2011: Hudson's Bay Co. sells leasing rights to the majority of its Zellers locations to Minnesota- based Target Corp for $ 1.83 billion. January 2012: Hudson's Bay Co. assumes operations of Lord and Taylor stores in the U. S. Both brands remain under the ownership of parent company NRDC Equity Partners. Nov. 26, 2012: Hudson's Bay Co. becomes a public company once again with the closure of a $ 365- million public offering. Shares are traded on the TSX under the symbol HBC. Jul. 29, 2013: The company announces a US$ 2.9 billion deal to acquire U. S. luxury retailer Saks. About seven full- line Saks stores and roughly two dozen discount location will operate in Canada. - The Canadian Press Saks stores coming to Canada . HBC to buy high- end retail chain for US$ 2.9B . Winnipeg in the running for stores THE CANADIAN PRESS RICHARD DREW / THE ASSOCIATED PRESS HBC might turn some of its stores into Saks locations, open new Saks stores in existing buildings, or construct new stores. The high- end chain will bring premium brands. NATHAN DENETTE / THE CANADIAN PRESS By Alexandra Posadzki B_ 04_ Jul- 30- 13_ FP_ 01. indd B4 7/ 29/ 13 8: 48: 52 PM ;