HBC, the parent corporation of Saks Fifth Avenue, is acquiring Saks’ longtime rival Neiman Marcus in a deal with an enterprise value of $2.65 billion.
The merger has been okayed by the two retailers’ boards but awaits regulatory approval.
Upon closing the deal, the companies will form Saks Global, combining Saks’ 39 locations with Neiman Marcus Group’s 36 Neiman stores and two Bergdorf Goodmans. The stores will continue to operate under their distinct brands.
HBC’s Canadian business, comprising the Hudson’s Bay department store chain, will become a stand-alone entity, separate from Saks Global, with reduced leverage and enhanced liquidity.
Current Saks CEO Marc Metrick will become CEO of Saks Global, and Ian Putnam, head of HBC Properties and Investments, will become CEO of Saks Global Properties and Investments. Both men will report to Richard Baker, Saks Global’s executive chairman. While Geoffroy van Raemdonck, CEO of Neiman Marcus since 2018, is quoted in the merger announcement, it did not mention if he will continue in that role.
Private equity firm Rhône Capital will be Saks Global’s leading investor. Considering it involves two legacy brands, the deal drew surprising interest from two leaders of the “new economy”: Amazon and Salesforce.com, both of which will be minority investors. A Wall Street Journal report said Amazon will help the new venture with “technology and logistical expertise,” while Salesforce will assist with artificial intelligence.
Other investors in the new company include the Abu Dhabi Investment Council and NRDC Equity Partners, a private equity firm run by Baker and his son Jack.
HBC has secured $1.15 billion in term loan financing from investment funds and accounts managed by affiliates of private equity firm Apollo, as well as a $2 billion asset-based loan from lead underwriter Bank of America, along with Citigroup, Morgan Stanley, RBC Capital Markets, and Wells Fargo.
Baker told The New York Times that the merger was a vote of confidence in brick-and-mortar retail.
“Customers love to go to a store,” he said. “Part of what excited us about acquiring Neiman Marcus was acquiring their world-class sales force. People have forgotten how important people are. When selling luxury products, you need beautiful stores and salespeople customers trust.”
HBC and Baker have acquired a number of department stores over the years, though not all those moves worked out well. Lord & Taylor, which they bought in 2012, and Fortunoff, acquired in 2008, both ultimately closed.
The Saks-Neiman merger had long been rumored. In 2017, Neiman spurned a buyout offer from HBC, shortly after canceling plans to go public.
In May 2020, the chain filed for Chapter 11, blaming the pandemic. It emerged from bankruptcy in September of that year.
(Photo courtesy of Neiman Marcus)
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