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Hudson's Bay to acquire Saks in $2.9 billion deal

Financing includes equity from minority owner of Serta, Simmons

TORONTO — Hudson's Bay Company, Canada's largest department store chain, said it has signed a definitive agreement to buy Saks Inc. in an all-cash transaction valued at about $2.9 billion.

HBC said it has agreed to pay $16 per share for the New York-based luxury retail chain, which will keep its iconic Saks Fifth Avenue brand name.

The deal must be approved by Saks shareholders, but is expected to close by the end of the year.

Financing includes $500 million in new equity from the Ontario Teachers' Pension Plan, which owns a stake in the parent company of bedding producers Serta and Simmons.

HBC said it has issued 1.5 million share purchase warrants to the pension plan, and will issue warrants for an additional 3.5 million shares when the transaction closes.

HBC already has a significant U.S. presence through its ownership of Lord & Taylor, a department store chain with 48 locations in northeast and Midwest.

In addition, HBC has 90 full-line Hudson's Bay stores and 69 Home Outfitters stores in Canada. The company said Home Outfitters is the country's largest home specialty superstore chain.

Saks operates 41 Saks Fifth Avenue stores and another 67 Saks Off 5th stores, which feature value-price clothing and accessories.

"The exciting portfolio of three iconic brands (Hudson's Bay, Lord & Taylor and Saks) creates one of North America's premier fashion retailers," said Richard Baker, HBC chairman and CEO. "I've had a long connection with Saks over the years, and am thrilled to bring one of the world's most recognized luxury retailers into the HBC family."

He said the combined company will operate 320 stores and would have generated sales of about C$7.2 billion in 2012.

HBC said the acquisition will provide significant growth opportunities, which will include the opening of Saks Fifth Avenue and Saks Off 5th stores in Canada.

The teachers' pension plan, which has about C$129.5 billion in assets, teamed with Ares Management LLC to buy Serta in 2005 and Simmons in 2010. Ares and the pension plan sold a majority of their stake in the bedding producers last summer to the private equity firm Advent International.

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