World-Class Retail Real Estate Portfolio
The combination of Saks and HBC’s real estate creates an unmatched coast-to-coast North American retail portfolio serving three strong banners. This real estate is highlighted by a number of marquee owned properties including
Saks Fifth Avenue locations on Fifth Avenue in New York City and Wilshire Boulevard in Beverly Hills; Lord & Taylor’s Fifth Avenue flagship; and Hudson’s Bay properties in downtown Toronto, Vancouver and Montreal, among others.
HBC will evaluate strategic alternatives to fully realize the substantial value from the combined property portfolio including but not limited to the creation of a real estate investment trust.
Financing of the Transaction
HBC intends to finance the transaction, and refinance certain existing indebtedness at HBC, with a combination of approximately US$1.0 billion of new equity, US$1.9 billion of senior secured loans, US$400 million of senior unsecured notes and available cash on hand. An entity affiliated with Ontario Teachers’ Pension Plan (“Teachers’”) and funds advised by West Face Capital Inc. (“West Face”) have separately committed to provide HBC with US$500 million and US$250 million of equity funding, respectively, to support this transaction. BofA Merrill Lynch and Royal Bank of Canada have provided HBC with fully committed credit facilities, which together with the equity commitment provided by Teachers’, is sufficient to close the transaction.
The Company has received conditional listing approval from the Toronto Stock Exchange for the common shares of the Company to be issued to Teachers’ and West Face. In consideration for Teachers’ commitment, concurrently with the execution of the merger agreement, HBC has issued 1.5 million share purchase warrants to Teachers’, and will issue an additional 3.5 million share purchase warrants to Teachers’ upon the closing of the transaction. In consideration for the West Face commitment, HBC will issue 1.75 million share purchase warrants to West Face upon the closing of the transaction. The subscription price of the common shares and the exercise price of the warrants will be C$17 per share (subject to adjustment in certain limited circumstances), which represents a premium to the trading price of HBC’s shares immediately prior to the announcement of the transaction.