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Hudson's Bay closes $500M investment by Rhône Capital

Hudson's Bay Co. has closed on a $500 million equity investment by Rhône Capital and has appointed two new members connected to the department store chain's recent slate of transactions to its board, the company announced Dec. 6.

Rhône Capital's equity investment was part of a larger set of transactions for the Canadian department store operator, including the sale of Lord & Taylor's flagship Fifth Avenue store in New York City to real estate startup WeWork. As the equity investment closed, Hudson's Bay appointed Steven Langman, managing director of Rhône, and Eric Gross, managing partner of WeWork Property Investors, to its board.

Hudson's Bay expects that the sale of the Lord & Taylor store will close before Aug. 10, 2018. The company said it has received a deposit of $75 million for the store, which has a total value of $850 million.

For the Rhône equity investment, Hudson's Bay said the proceeds will be used to repay outstanding debts on its revolving credit facility, reducing future interest costs.

Previously, Hudson's Bay received conditional approval of the investment in the form of 8-year mandatory convertible preferred shares. With the announcement of the deal closing, the department store operator said it has issued about 50.92 million "A" 8-year mandatory convertible preferred shares for $500 million. The preferred shares are convertible to common shares at $9.82 per share, although that price is subject to adjustment.

In the build-up to the closing of the deal, Hudson's Bay received pushback from activist investor Land & Buildings Investment Management LLC, which appealed to the Toronto Stock Exchange on the conditional approval of the Rhône investment. On Dec. 1, Hudson's Bay reached an agreement with Land & Buildings that the activist investor would withdraw its appeal. Previously, Land & Buildings has pushed for the department store operator to go private, sell parts of its company or monetize its retail holdings.

Hudson's Bay also announced that its board approved the company's regular quarterly dividend of 1.25 cents per common share to be paid Jan. 15, 2018.