By Preeteesh Peetabh Singh
Dialog Reporter
Hudson’s Bay Co. (HBC), Canada’s oldest company is set to re-launch itself in the Toronto Stock Exchange (TSX) through an Initial Public Offering (IPO).
With an offering share price of $17, the veteran retail company will be valued at around $2 billion. HBCplans to sell a total of 21 million shares, roughly 20 per cent of the company’s total stock, and is hoping to raise about $365 million through the IPO.
Inuit outside the Hudson’s Bay Company post, 1949. Source: Library and Archives Canada, S.J. Bailey, Indian and Northern Affairs, Departmental Library Albums.
This amount will be used by the company to pay off its debt and try to free itself from more than $225 million in rent payments. HBC owes rent until at least 2016 on leases at its Zellers discount chain that were not sold to Target Corp.
Founded in 1670, HBC was a fur trading business, running trading posts in what is now Canada. The company grew steadily by propelling into departmental and eventually retail stores across the country and also in the United States. HBC operates under the name of, The Bay, Zellers, Home Outfitters and Lord & Taylor.
The company’s performance was in dire straits as shoppers fled from HBC to U.S. based heavyweights such as Wal-Mart. It went private in 2006 when the susceptible company was bought by Israeli born American businessman Jerry Zucker for $1.7 billion. He became the first U.S. citizen to lead the company.
In 2008, after Zucker’s death from cancer, the company was sold to New York based NRDC equity partners, a private equity firm founded by U.S. businessman Richard Baker. Baker, who already had a stake in the business, bought the remainder of the stake for $1.1 billion. He is the current chairman and CEO of HBC.
In fiscal 2005, its last year of operation in the public markets, it posted losses of $175 million, sales went down 1.7 per cent to $6.94 billion and same store sales fell 1.6 per cent, the fifth consecutive year of decline.
The decision to enter the stock market again, is being viewed as a survival strategy for HBC. With the public offering, the company’s attempt is to pay down debt and clean up its balance sheets quickly, as threat loom from the U.S. rivals such as Target Corp. and Nordstrom Inc. who are set to enter the Canadian market from next year.
HBC’s shaky endeavors can be authenticated by the sale of its nine off-price retail stores called Designer Depot in 2011. Designer Depot did not meet sales expectations. Another HBC chain, Fields, was sold to a private firm in 2012. The company also sold majority of its Zeller’s store leases to Target Corp and announced the intentions to close the remaining ones by early 2013.
However, it posted a profit of $57 million last year after losing $160 million in the previous two years.
The shares will trade in the TSX under the name of ‘HBC’ from Nov 26.
