Hudson's Bay Co. said Aug. 28 that it agreed to sell its Lord & Taylor department store business to subscription-based clothing rental platform Le Tote Inc.
The Canadian company will receive C$99.5 million in cash after the transaction closes and a secured promissory note for C$33.2 million payable in cash after two years.
Hudson's Bay will also get an equity stake in Le Tote as a minority shareholder, as well as two seats on the San Francisco-based company's board.
Under the agreement, Le Tote will acquire Lord & Taylor's brand and intellectual property and assume operations of 38 physical stores, digital channels and associated inventory.
Hudson's Bay and its real estate joint venture HBS Global Properties will retain ownership of all owned and ground-leased real estate assets related to Lord & Taylor. Hudson's Bay will be responsible for making rent payments related to Lord & Taylor stores for at least three years.
The company expects to be liable for about C$77 million in total cash rent on an annual basis.
Hudson's Bay and Le Tote will have the option to reassess Lord & Taylor's store network starting in 2021. The Canadian company could evaluate select locations and determine their best use, including possible redevelopment into mixed-use properties.
Hudson's Bay started exploring strategic options for Lord & Taylor in May. Earlier in August, Women's Wear Daily reported that Hudson's Bay was close to reaching a deal with Le Tote for Lord & Taylor.
Le Tote is in the process of securing financing for the deal. If it fails to obtain the committed financing within 45 days of signing the agreement, Hudson's Bay has the right to terminate the deal.
The deal is expected to close before the start of the 2019 holiday season, subject to the satisfaction of closing conditions.
PJ Solomon was financial adviser to Hudson's Bay, while Willkie Farr & Gallagher LLP was its legal adviser. Citi was a financial adviser to Le Tote and Kirkland & Ellis LLP was its legal adviser.
