Hudson's Bay Co. HBAYF

Today's TD Waterhouse comment

[frankstevens17]

Hudson's Bay Co. (HBC-T) C$12.15 A Potential Bid For HBC's German Business Brian Morrison, CA Meaghen Annett, CFA Event Shares of HBC appreciated by ~7% today after a news report surfaced that HBC's prime German competitor SIGNA (owner of Karstadt) had made a 3-billion offer for its Kaufhof business inclusive of its real estate. The stock was halted earlier today, and HBC released that it had received today "an incomplete, non-binding, and unsolicited offer with no evidence of financing from SIGNA Holding GmbH, to acquire the company's German business, as well as other real estate assets." In addition, HBC stated that "the Board intends to review the offer in due course, and cautions that the offer is subject to many assumptions, conditions, and contingencies." Impact: POTENTIALLY POSITIVE This is not the first time there have been media rumours with respect to SIGNA being interested in the German assets of HBC, but is the first time HBC has confirmed such interest. Recall in mid-2015, HBC acquired Galeria Holding for an EV of ~$2.5-billion, and concurrently sold the real estate portfolio to the HBS JV for ~2.6-billion. While the real estate portfolio value may have increased, the 3-billion offer reported in the media seems potentially high considering our view that the financial performance of Kaufhof post the HBC acquisition has declined. HBC states that it received the offer today from SIGNA but there has been speculation previously. In our view, if there is/was potential merit to a transaction involving the German assets, then we once again question the rationale behind the dilutive preferred equity issue last week. Should a transaction take place at terms similar to the media report (3-billion transaction value, 2.6-billion for real estate assets), this would result in the total value of our NAV (prior to the allocation of discounts) increasing by ~$3 per share. Our next train of thought would be the use of proceeds, inclusive of the potential to place leverage back upon the HBS JV. We would in this scenario estimate surplus cash within the JV at ~$1.9-billion. Clearly, we would view a transaction positively, however, the impact upon the share price will depend upon its probability, the potential transaction price, and the allocation of the proceeds.

[TheRock077]

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[biggerr]

"take the money and run" like Woody Allen used to say. Because 90% of the offer is for the real estate it shows that their business in Germany is worth sh*t, they should take the money and pay off their huge debt even partially which would enhance the SP

[frankstevens17]

If it's a cash offer with a quick closing, I agree 100%.

[CaptainConn]

They performance of the european assets has frankly been trash. There will be hell to pay (from Litt) if they do not take this deal

[frankstevens17]

I agree management should take the deal if it's cash, but forget about Litt he's just another shareholder and has little influence in the future of HBC.