Department store operator Hudson's Bay (HBAYF) announced on Thursday, Jan. 7, it would pay $250 million in cash for Gilt Groupe Holdings, which was once valued by its venture backers at up to $1 billion in 2011.

Hudson's Bay will fund the deal with cash on hand and anticipated it would close around Feb. 1.

The Toronto parent of retailers such as Saks Fifth Avenue, Lord & Taylor and Home Outfitters projected Gilt, a New York-based online retailer of luxury goods, would add some $500 million in revenue in fiscal 2016. Hudson's Bay also said the deal would add about $40 million in adjusted Ebitda by fiscal 2017 through both revenue and cost savings.

Hudson's Bay plans to combine Gilt with its off-price business Saks Off 5th, it said. The target is said to have more than 9 million members and generate 50% of its orders via mobile devices. The acquirer also said it plans to use Gilt's mobile and personalization capabilities at all of its businesses to increase the growth of its overall digital business.

Gilt customers will be able to return goods to Saks Off 5th physical locations following the merger, and Gilt shops will open at the discount banner's stores.

"With this transaction we are further accelerating both HBC's all-channel offering and Gilt's growth. We plan to continue to foster Gilt's culture of innovation, which has helped create a strong brand with a loyal and devoted Millennial following," Hudson's Bay CEO Jerry Storch said in the statement.

Founded in 2007, Gilt gained a great deal of fanfare in the fashion world because of its flash sales model, which gave shoppers a limited time window on specific deals for limited offerings.

But once the recession receded and along with it, the excess inventory that accompanied it, not to mention increased competition more broadly among retailers offering luxury goods at a bargain, customers became less excited by Gilt's offerings.

Gilt has raised nearly $290 million in venture capital from investors since 2007. Its investors, according to previous reports, include Goldman Sachs's(GS) - Get Report GS Capital Partners, Matrix Partners, Draper Fisher Jurvetson, SoftBank (SFTBF) Capital, General Atlantic Partners, Eastward Capital Partners, GSV Capital, TriplePoint Capital, Pinnacle Ventures and New Enterprise Associates.

Scotiabank provided financial advice to Hudson's Bay, while a Willkie Farr & Gallagher team that included Gordon Caplan, Gregory Astrachan and Michael Brandt as well as Stikeman Elliott provided the buyer with legal advice.

Jason Wooten of Lazard, meanwhile, provided financial advice to Gilt, while a Wilmer Cutler Pickering Hale and Dorr team that included Mark Borden, Jeff Hermanson, Christie DiNapoli and Britt Eichner provided the target with legal advice.

Hudson's Bay shares, traded on the Toronto Stock Exchange, were down C3 cents to C$16.90 (or $12.03) on Thursday morning.