Canadian department store operator Hudson’s Bay Co (TSX: HBC) has agreed to acquire Gilt Groupe Holdings Inc, an online shopping destination based in New York. HBC agreed to pay US$250 million in cash in a deal that is expected to close by February 1st. The acquisition is expected to contribute about US$500 million to HBC’s total 2016 sales and provide opportunities for the company to accelerate the growth of its digital platform. Founded in 2007, Gilt has raised US$271 million in venture capital funding, according to Thomson Reuters‘ data. Its investors include General Atlantic, Goldman Sachs, NEA and SoftBank. HBC has been backed by NRDC Equity Partners since 2008.
Hudson’s Bay Company to Acquire Gilt
Acquisition Accelerates HBC’s All-Channel Growth
Strong Mobile and Personalization Expertise Will Advance Pace of Innovation Across HBC’s Rapidly Growing Digital Business
Gilt has Loyal and Devoted Millennial Membership
January 07, 2016
TORONTO & NEW YORK–(BUSINESS WIRE)–(All amounts in US dollars) – Hudson’s Bay Company (“HBC” or the “Company”) (TSX: HBC) today announced that it has entered into a definitive agreement to acquire Gilt Groupe Holdings, Inc. (“Gilt”) for $250 million in cash, subject to customary requirements.
This transaction reflects HBC’s ongoing focus on advancing its all-channel model while continuing to grow its successful off-price business through the integration of Gilt with Saks OFF 5TH locations.
Gilt is a leading and innovative online shopping destination, offering its members special access to inspiring fashion merchandise and experiences. With over 9 million members and approximately 50% of orders generated on its mobile platform, Gilt has cultivated a loyal and devoted millennial following.
Jerry Storch, the Chief Executive Officer of HBC, stated, “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. Adding Gilt to our rapidly growing digital business is very exciting and we see tremendous potential to enhance our mobile and personalization strategies by leveraging Gilt’s advanced capabilities. We look forward to welcoming the Gilt team to HBC and to benefitting from the complementary nature of our businesses.”
“HBC and Saks OFF 5TH are the ideal home for Gilt and our members,” said Michelle Peluso, Chief Executive Officer of Gilt. “HBC understands our proposition and is committed to positioning our business for further success. Our members will find having a brick and mortar presence valuable and a positive addition to the Gilt experience. We are excited for our future and confident that we have the right team in place to continue to innovate the shopping experience and grow Gilt.”
The transaction is expected to contribute approximately $500 million to HBC’s consolidated fiscal 2016 sales and be complementary to HBC’s existing business. Additionally, HBC plans to leverage Gilt’s mobile and personalization capabilities to accelerate the growth of HBC’s digital business across all of its existing banners.
The Company also expects to benefit from the integration of Gilt with Saks OFF 5TH locations, including the introduction of a new return program at Saks OFF 5TH locations for Gilt merchandise following the closing of the acquisition. HBC also expects to create Gilt concept shops at Saks OFF 5TH stores, developing a true all-channel model for Gilt.
The Company expects Gilt to contribute approximately $40 million of Adjusted EBITDA by fiscal 2017, which is expected to be generated from both revenue and cost drivers. Opportunities for revenue growth at Gilt include growth in Gilt’s underlying business, revenue synergies from accepting Gilt returns at Saks Off 5th stores, and growth in Gilt’s membership from leveraging HBC’s customer base to source new members. Opportunities for revenue growth at Saks Off 5th include increased customer traffic to stores from Gilt customers making returns and sales to customers visiting Gilt concept shops inside Saks Off 5th locations. Opportunities for expense savings and operational efficiencies from combining the businesses include reduced shipping costs, increased purchasing power, and shared inventories across Gilt and Saks Off 5th.
HBC expects to fund the $250 million purchase price plus transaction costs using cash on hand. The transaction is expected to close on or about February 1, 2016, subject to customary closing conditions and Gilt shareholder approval.
Scotiabank is acting as exclusive financial advisor to HBC. Willkie Farr & Gallagher LLP acted as M&A legal counsel, and Stikeman Elliott LLP served as company legal counsel. Lazard is acting as exclusive financial adviser to Gilt and Wilmer Cutler Pickering Hale and Dorr is acting as its counsel.
For media use: Photos and b-roll related to the Hudson’s Bay Company acquisition of Gilt available at : http://investor.hbc.com/releases.cfm
About Hudson’s Bay Company
Hudson’s Bay Company is one of the fastest-growing department store retailers in the world, based on its successful formula of driving the performance of high quality stores and their all-channel offerings, unlocking the value of real estate holdings and growing through acquisitions. Founded in 1670, HBC is the oldest company in North America. HBC’s portfolio today includes nine banners, in formats ranging from luxury to better department stores to off price, with more than 460 stores and 65,000 employees around the world.
In North America, HBC’s leading banners include Hudson’s Bay, Lord & Taylor, Saks Fifth Avenue and Saks OFF 5TH, along with Find @ Lord & Taylor and Home Outfitters. In Europe, its banners include GALERIA Kaufhof, the largest department store group in Germany, Belgium’s only department store group Galeria INNO, as well as Sportarena.
HBC has significant investments in real estate joint ventures. It has partnered with Simon Property Group Inc. in the HBS Global Properties Joint Venture, which owns properties in the United States and Germany. In Canada, it has partnered with RioCan Real Estate Investment Trust in the RioCan-HBC Joint Venture.
Gilt, www.Gilt.com, is an innovative online shopping destination offering its members special access to the most inspiring merchandise and experiences all at insider prices. Gilt opens a window every day to the exceptional as it continually searches the world for the most coveted brands and products, including fashion and accessories for women, men, and children; home decor; and unique activities in select cities and destinations.
Certain statements made in this news release, including, but not limited to, statements relating to the contemplated acquisition of Gilt, timing and benefits that are expected to result from the proposed acquisition, including the addition of approximately $500 million to HBC’s consolidated fiscal 2016 sales, the expected benefits from the integration of Gilt with Saks OFF 5TH locations, the expected contribution by Gilt of approximately $40 million of Adjusted EBITDA by fiscal 2017, and other statements that are not historical facts, are forward-looking. Often but not always, forward-looking statements can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “believe”, “estimate”, “plan”, “could”, “should”, “would”, “outlook”, “forecast”, “anticipate”, “foresee”, “continue” or the negative of these terms or variations of them or similar terminology.
Although HBC believes that the forward-looking statements in this news release are based on information and assumptions that are current, reasonable and complete, these statements are by their nature subject to a number of factors that could cause actual results to differ materially from management’s expectations and plans as set forth in such forward-looking statements for a variety of reasons. Some of the factors – many of which are beyond our control and the effects of which can be difficult to predict – include, among others (a) the failure to obtain, on a timely basis or otherwise, required approvals for the proposed acquisition; (b) the risk that a condition to completion of the proposed acquisition may not be satisfied; (c) the possibility that the anticipated benefits from the proposed acquisition cannot be realized; (d) the ability of HBC to retain and attract key Gilt personnel and for Gilt to maintain relationships with customers, suppliers and other business partners; (e) credit, market, currency, operational, liquidity and funding risks generally, including changes in economic conditions, interest rates or tax rates; and (f) risks and uncertainties relating to information management, technology, supply chain, product safety, changes in law, competition, seasonality, commodity price and business. The proposed acquisition could be modified, restructured or terminated.
HBC cautions that the foregoing list of important factors and assumptions is not exhaustive and other factors could also adversely affect its results. For more information on the risks, uncertainties and assumptions that could cause HBC’s actual results to differ from current expectations, please refer to the “Risk Factors” section of HBC’s third quarter Management Discussion & Analysis dated December 10, 2015, as well as HBC’s other public filings, available at www.sedar.com and at www.hbc.com.
The forward-looking statements contained in this news release describe HBC’s expectations at the date of this news release and, accordingly, are subject to change after such date. Except as may be required by applicable Canadian securities laws, HBC does not undertake any obligation to update or revise any forward-looking statements contained in this news release, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on these forward-looking statements.
Hudson’s Bay Company:
Kathleen de Guzman, (646) 807-0148
Elliot Grundmanis, (416) 256-6732
Hudson’s Bay Company:
Kathleen Waugh, (212) 391-5350
Andrew Blecher, (212) 391-3179
Photo courtesy of Reuters/Mark Blinch