Hudson’s Bay Co. in talks for joint venture with Austria’s Signa

Hudson’s Bay Co. says it is in talks with European retailer Signa Holding GmbH regarding a potential joint venture.

The Canadian retailer says it has signed a non-binding letter of intent with respect to the exploration of the idea.

The retailer denied reports in the Financial Times and Wall Street Journal that it had a deal to sell half its European retail business to Austrian-based Signa, which owns rival retailer Karstadt.

In Europe, HBC owns the Kaufhof department store chain in Germany and Belgium, Lord & Taylor and has plans to open HBC stores in the Netherlands and other countries.

In response to the media reports, HBC said it has not signed a binding agreement to sell or combine its European business or properties.

It noted there could be no assurance that the talks will lead to a transaction.

A potential deal between the two could pave the way for a German department store monopoly and signals that HBC still sees value in Kaufhof, despite its European operations seeing a 6.6. per cent decrease in overall comparable sales in the last quarter.

HBC scooped up Kaufhof from German retailer Metro AG in 2015 for three billion euros ($4.5 billion Cdn).

Signa made an unsolicited bid late last year for HBC’s German operations, but withdrew the offer earlier this year after it was rejected by the HBC board.

In a press release Friday, HBC said any potential deal would be subject to board and third party approval. HBC has been under pressure from investors to reduce its debt amid lacklustre sales. 

The most outspoken of the stakeholders has been Jonathan Litt, chief investment officer and founder of activist investor Land & Buildings Investment Management, who has repeatedly complained that HBC is really a real estate company, not a retailer, that has failed to outline a plan to unlock the “substantial real estate value trapped in the company.”

Last month, he released a note saying HBC should look towards American department store chain Macy’s as HBC’s underperfomance “has become even more pronounced.”

“Hudson’s Bay could learn a lot from the way Macy’s has built a credible real estate team to help drive its turnaround,” Litt wrote, at the time. “One could even reasonably ask whether the most logical course for HBC at this point would be an acquisition by Macy’s as opposed to trying to play catch up.”

While Litt has been outspoken about the company’s real estate, a Lands & Building spokesperson declined to comment Friday about its take on HBC being in talks with Signa.

SOURCE: CBC.ca

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