Hudson’s Bay Company to Acquire Gilt
Hudson’s Bay Company (TSX: HBC) announced on January 7, 2016 that it has entered into a definitive agreement to acquire Gilt Groupe Holdings, Inc. 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.