Ontario Teachers' Pension Plan is investing US$500 million and activist investment manager West Face Capital is investing $250 million in the $2.9 billion purchase of Saks Inc. by Hudson's Bay Co., confirmed Deborah Allan, director, communications and media relations for the Toronto-based pension plan.
In exchange for its commitment, the C$129.5 billion (US$125.9 billion) Ontario Teachers plan will receive 1.5 million share purchase warrants when the merger agreement is signed and an additional 3.5 million share purchase warrants when the transaction is closed. West Face will receive 1.75 million share purchase warrants upon closing of the transaction. The exercise price of the warrants and the subscription price of the common shares will be C$17 per share. Hudson's Bay has received conditional approval to issue shares on the Toronto Stock Exchange for OTPP and West Face. The transaction is subject to a 40-day go-shop period during which Saks can solicit other offers.
Ontario Teachers' Pension Plan considers the investment a public equity transaction with “strong monetization opportunities,” Ms. Allen wrote in an e-mailed response to questions.
According to an Ontario Teachers news release Monday, the deal creates a coast-to-coast North American retail portfolio serving three retail brands: Saks, Lord & Taylor and Hudson's Bay. Hudson's Bay expects to eventually realize “substantial value” from the combined real estate portfolio, possibly through creating a real estate investment trust.
“We see this deal as an excellent and rare retail investment opportunity and one that offers great synergies to the companies involved,” Ms Allen stated. “It's a classic OTPP investment, which partners with a leading industry player to dramatically transform a company, and which demonstrates all of OTPP's strengths as a leading, long-term investor. We're very excited to be involved in such a dynamic transaction involving such historied and iconic brands.”
Hudson's Bay is owned by Purchase, N.Y.-based NRDC Equity Partners.