Michael J. Knell — Furniture Today,
U.S. investor’s bid gets board’s nod

TORONTO — The board of Hudson’s Bay Co., one of the world’s oldest merchants and still a significant purveyor of furniture and bedding, has endorsed a takeover bid by South Carolina-based investor Jerry Zucker.

Zucker’s Maple Leaf Heritage Investments Acquisition Corp. is seeking to buy all the multi-channel retailer’s outstanding shares for C$15.25 per share. The board rebuffed an earlier offer of C$14.75 from Zucker, who already owns nearly 19% of the beleaguered retailer’s shares.

If successful, the bid, which requires regulatory approval, would give Zucker control of HBC for about C$1.1 billion. A Maple Leaf Heritage spokesman said Zucker intends to continue operating HBC largely as is, while improving customer service and putting more money into existing stores.

HBC has three major retail banners:

* The Bay, a 98-unit department store chain that has been a furniture and bedding powerhouse, although that has weakened in recent years.

* Zellers, a 294-unit discounter similar to Wal-Mart and Target that sells an array of imported furniture, both ready-to-assemble and assembled, and promotional and lower midrange bedding. The chain recently got back into household appliances.

* Home Outfitters, a 56-store chain of home accessory stores that sells everything from bed and bath to occasional furniture. It’s seen as HBC’s shining star and has been the fastest-growing and most profitable of the divisions.

HBC also has two smaller banners, Designer Depot and Fields, and an e-commerce site, Deals Outlet.ca.
In late 2003, HBC unveiled a strategic plan that aimed to regain past glories in all big-ticket categories, including furniture and bedding. Zucker repeatedly has been quoted as a big booster of that strategy, but has been disappointed by its execution.

Observers in the financial and retailing sectors note that HBC has a host of salable assets, including an estimated C$700 million worth of real estate. Some have suggested a merger between HBC and Sears Canada, its main rival, could be the best way for the department store format to survive.

Such a merger, observers say, would allow both companies to shed real estate and sell off businesses that could stand on their own. That might include the sale of Zellers to U.S.-based Target Corp.

Sears Canada, meanwhile, is being acquired by U.S.-based Sears Holding, which is buying all the Sears Canada shares it doesn’t already own. That effort is expected to close in the next few weeks. Sears Holdings, the result of last year’s merger of U.S.-based Sears and discounter Kmart, is controlled by financier Edward Lampert.