all that US cash - buy canada - hehe
=DJ UPDATE: HBC, Canada's Oldest Co., Soon To Have US Owner
(Adds comments from Hudson's Bay spokesman in final four paragraphs and updates stock price.)
By Andy Georgiades
Of DOW JONES NEWSWIRES
TORONTO (Dow Jones)--After a lengthy auction process, Canada's oldest corporation, Hudson's Bay Co. (HBC.T), will soon be in the hands of its largest shareholder, U.S. businessman Jerry Zucker.
As reported, Maple Leaf Heritage Investments and Hudson's Bay, better-known as HBC, have agreed to a takeover price of C$15.25 a share for the struggling department-store operator, an improvement of 50 Canadian cents from Zucker's initial bid in late October.
"Ultimately, our decision to increase the bid was based on our understanding of the company," said Zucker spokesman Robert Johnston. "We always said from the very beginning of this process that we may be in a position to increase the bid."
He noted that the higher bid, which now demands that two-thirds of HBC's shares are tendered - down from his previous requirement of 90% - now has the support of management and will still create "incredible value."
"We're very excited about the opportunity to acquire the company, to be associated with a Canadian icon like the Hudson's Bay Company. We're looking forward to revitalizing the company's operations with an enhanced focus on customer satisfaction," Johnston told Dow Jones. "We think this is a great day for us."
In Toronto Thursday, the stock has risen C$1.10, or 7.9%, to C$15.03 on about 13.4 million shares.
Maple Leaf's amended offer for HBC, which operates the Bay, Zellers, and Home Outfitters chains, will be mailed Feb. 10 and expires Feb. 24.
"We are pleased to have reached this agreement with HBC today and to be associated with a company with such a long and proud history," Zucker, who rarely gives interviews, said in a news release. "As the company's largest shareholder for more than two years, we are aware of the tremendous opportunities available to HBC. We look forward to working with management and associates to build upon the company's strong position and dynamic growth opportunities."
Johnston said the auction process for HBC, which operates more than 500 stores across Canada, was more "vibrant" than recent media reports suggested.
The Globe and Mail newspaper reported Thursday that bids by Onex Corp. (OCX.SV.T) and Cerberus Capital Management, in partnership with Riocan Real Estate Investment Trust (REI.UN.T), were in the range of C$10-12 a share. Johnston said he has reliable sources telling him otherwise, and that this range is "materially incorrect." He declined to elaborate.
"We clearly know this company better than any other bidder. We've been watching this company very closely for in excess of two-and-a-half years now," said Johnston, who said the total value of the deal was about C$1.5 billion. "We feel very good about this decision."
When Zucker first became a shareholder in 2003, Hudson's Bay management, led by president and chief executive George Heller, had an impressive five-year growth plan. But the company's financial performance deteriorated, and those targets were scrapped. While the results concerned Zucker as well, Johnston said the opportunity to set the business right couldn't be ignored either.
"We continue to come back to the underlying value and underlying assets in this company. Its brand recognition is universal in Canada, it has a national footprint... extensive loyalty points program," he said.
Once Zucker takes up all the company's 69.5 million outstanding shares, it will cease to be publicly traded, and that's a good thing, Johnston said, as it will take the pressure off the company from having to make its quarterly numbers and look at the medium-to-long-term instead.
"I think not having the financial community looking over your shoulder all the time will allow management to focus more extensively on the operations," he said.
Johnston said the prototype discount Zellers stores are "outstanding shopping experiences" and will continue to be opened and retrofitted in current locations. He also said the plan is to "reinvigorate" the company and run it with the long term in mind, not break it apart. "There's no exit strategy," he said.
With respect to current management, he said no decision has been made, but Zucker will be meeting with executives in the coming weeks to see if their "interests and goals are aligned."
Greg Eckel, a portfolio manager at Morgan Meighen & Associates, and owner of HBC stock and bonds, said he was glad he hung on to his holdings and didn't "react" to what he read in the newspapers, allowing him to better returns for unitholders.
Nevertheless, he said he wasn't too impressed with management, and expected more from their so-called "robust" auction process. "There's got to be disappointment on how effective they've been through the process," he said. Eckel said he would have expected management to come up with other options for creating value and allow shareholders to choose the one they thought was best.
Rob Moore, spokesman for HBC, said the company was obliged to begin a process to maximize shareholder value, and that process led to an enhanced offer of C$15.25 a share from Zucker. "The board determined that this (bid) represented full and fair value," he said.
Moore noted there were "multiple" offers for the company, confirmed that Friday had been the deadline for bids, and said negotiations with more than one party have been taking place ever since. While price is by far the most important factor, he said it wasn't the only one considered, but wouldn't go into details. "It was a competitive process," he said.
As for HBC's credit-card operations, for which the company announced it was seeking alternatives to surface value before the auction started, Moore said that process is ongoing and he expects an announcement on that front in the near future.
He also said it hasn't been determined if HBC will still release its year-end results publicly in early March, as previously scheduled.
-Andy Georgiades, Dow Jones Newswires; 416-306-2031; andy.georgiades@dowjones.com
Company Web Site: hbc.com |
