HBC & Le Tote sign agreement to acquire Lord + Taylor
September 05, 2019 - United States Of America
Hudson’s Bay Company (HBC) and Le Tote have signed an agreement to acquire Lord + Taylor. HBC is a retailer focused on driving the performance of high quality stores and their omni-channel platforms and unlocking the value of real estate holdings. Le Tote is a fashion subscription service that lets women rent clothing and accessories for a flat monthly fee.
Le Tote’s proprietary technology, data, and innovation combined with Lord + Taylor’s traditional store footprint, e-commerce presence and merchandise selection will offer customers a new experience in the mid-market segment, according to HBC.
Under the terms of the agreement, Le Tote will acquire the Lord + Taylor brand and related intellectual property while assuming operations of 38 stores, Lord + Taylor’s digital channels and the associated inventory. Le Tote expects to extend employment offers to the vast majority of Lord + Taylor’s associates.
HBC will receive $99.5 million (USD$75 million) in cash upon the transaction’s closing and a secured promissory note for $33.2 million (USD$25 million) payable in cash after two years. In addition, HBC will receive an equity stake in Le Tote, two seats on the company’s Board of Directors and certain rights as a minority shareholder.
HBC and HBS Global Properties, HBC’s real estate joint venture, will retain ownership of all owned and ground-leased real estate assets related to Lord + Taylor. For at least the initial three years, HBC has agreed to maintain economic responsibility for the rent payments owed by Lord + Taylor at the locations operated by Le Tote. Net of HBC’s distributions from HBS Global Properties, HBC expects to continue to be liable for approximately $77 million in Lord + Taylor total cash rent on an annual basis.
Starting in 2021, HBC and Le Tote will have options to reassess the Lord + Taylor store network. This may include HBC recapturing select locations to determine their highest and best use, including possible redevelopment into mixed-use properties with a variety of services, experiences and retail offerings. HBC has hired a team of seasoned professionals to lead the planning and execution of any redevelopment, which is an inherently complex, capital intensive, long-term project. For any recaptured or returned stores, HBC retains long-term rent responsibility, risk and costs for redevelopment.
Le Tote is in the process of securing financing for the full purchase price. The transaction is expected to close before the start of the 2019 holiday season, subject to satisfaction (or waiver) of closing conditions.
PJ Solomon acted as financial advisor to HBC for this transaction and throughout the review of strategic alternatives for Lord + Taylor and Willkie Farr & Gallagher acted as legal advisor to HBC. Le Tote was advised by Citi, as its financial advisor, and Kirkland & Ellis, as its legal advisor, in connection with the transaction. (GK)