Bay changes hands

July 17, 2008
Winnipeg Free Press
Written by: David Friend

TORONTO -- The Hudson's Bay Co. has been bought by the owner of upscale American department store chain Lord & Taylor, which plans to expand its brand into Canada and give a fresh approach to both the Bay and Zellers.

HBC, which has a 338-year history that contributed to the exploration and development of large parts of Canada, has been under American ownership since 2006, when it was bought for $1.1 billion by entrepreneur Jerry Zucker.

Since Zucker's death in April, there had been speculation HBC would be sold.

The buyer, New York-based NRDC Equity Partners, plans to give HBC operations a major facelift that will expand on the behind-the-scenes work Zucker had initiated.

NRDC launched a similar plan in 2006 when it acquired the Lord & Taylor group for $1.2 billion in cash and took a bottom-up approach to reworking the image of the company.

NRDC also owns Fortunoff jewelry stores and Creative Design Studios home-decor chain.

The value of the deal hasn't been publicly disclosed, but representatives for the Bay and NRDC have said it's "slightly" higher than the initial sale price of $1.1 billion two years ago.

The combined company, to be known as the Hudson's Bay Trading Co., has 75,000 employees and annual sales totalling more than US$8 billion.

Richard Baker, a principal with the new owner, becomes CEO of Hudson's Bay Trading Co. and 38th governor of the Hudson's Bay Co. He said NRDC will make a new investment of $500 million in the project.
"Enormous potential exists by upgrading the offerings at both the Bay and Zellers and by bringing Lord & Taylor, Fortunoff & CDS into the mix," Baker said.

He said Lord & Taylor is set to launch 10 to 15 stores in Canada, filling a gap in the Canadian retail landscape between the mid-market Bay department stores and the more upscale Holt Renfrew chain.

"We are not closing any Bay stores to open up Lord & Taylor, and the primary focus is to improve the Bay business," Baker said in an interview.

Those improvements include bringing in more outside brands, improving customer service and broadening product selection, he said, noting the company will adopt a more competitive approach to gaining market share.

Zucker's widow, Anita Zucker, chairwoman and CEO of the InterTech Group, said NRDC was an excellent fit for the company, with their strong background in retail and real estate.

"The InterTech Group now turns to other global opportunities to continue to build and strengthen our portfolio of companies," she said in a statement.

Since the demise of the legendary Eaton's chain, the Bay's main direct competitor has been Sears department stores owned by Sears Canada Inc. (TSX:SCC), which acquired a few of the Eaton's locations and added them to its existing chain. Prior to that, the Canadian department store chain underwent a period of consolidation -- including HBC's acquisition of the Woodward's and Simpsons chains -- that left very few retailers offering the Bay's broad range of fashion, jewelry, housewares, appliances, furniture and electronics.

"In Canada, the Bay has not had to deal with a lot of competition, so we believe they haven't been as aggressive and focused on service and price and the quality and selection of the merchandise as they could be," Baker said.

With the plan, the Bay could wind up having several stores, such as a Lord & Taylor location or Fortunoff jewelry store under its roof.

-- The Canadian Press

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