Hudson’s Bay Company Completes Acquisition of GALERIA Holding

HBS Global Properties Acquires 41 GALERIA Properties in a transaction valued at €2.6 billion

With Acquisition, HBC Grows to between $14.5 and $15.5 Billion in Pro Forma Annual Sales in Fiscal 2016(1)

Adjusted EBITDAR Guidance of $1.7 to $1.9 Billion in Fiscal 2016, Compared to $869 Million in Fiscal 2014(1)(2)

Adjusted EBITDA Guidance of $950 to $1,100 Million in Fiscal 2016, Compared to $612 Million in Fiscal 2014(1)(2)

TORONTO & COLOGNE, Germany--()--Hudson’s Bay Company (“HBC” or the “Company”) (TSX: HBC) is pleased to announce that it has successfully completed the previously announced acquisition (the “Acquisition”) of GALERIA Holding (“GALERIA”), the parent company of Germany’s leading department store GALERIA Kaufhof (“Kaufhof”) and Belgium’s only department store, Galeria INNO (“INNO”), for an enterprise value of €2.5 billion (C$3.8 billion)(3). In conjunction with the closing, HBS Global Properties, HBC’s real estate joint venture with Simon Property Group, acquired 41 GALERIA properties in a transaction valued at €2.6 billion (C$3.9 billion)(4).

With the Acquisition, HBC has an international retail platform with over 460 locations across 8 leading banners in 4 countries, and operates the leading department store banners in Canada, Germany, and Belgium, in addition to its iconic banners Saks Fifth Avenue, Lord & Taylor, and Saks OFF 5TH in the United States.

“This is a very exciting day in our 345 year history,” stated Richard Baker, HBC’s Governor and Executive Chairman. “Adding GALERIA to the HBC family is a significant step forward in our international growth plans. The closing of these transactions demonstrates our proven growth formula in action: improving successful retail operations, unlocking the value of real estate and growing through acquisitions. Expanding our footprint into Europe also provides HBC with a strong foundation to explore additional growth prospects throughout the Continent.”

Jerry Storch, HBC’s Chief Executive Officer, said: “We believe that there are tremendous opportunities to grow the Kaufhof and INNO banners, and look forward to working with the existing management team to execute on our combined vision for the future of this business. This vision includes dramatic enhancements to the customer experience through the introduction of new brands, a focus on high-performing merchandise categories, substantial expansion of Kaufhof’s digital capabilities and, over time, introduction of Saks Fifth Avenue and Saks OFF 5TH into the German market. We look forward to welcoming each of GALERIA’s 21,500 employees to the HBC team as, together with our existing 44,000 employees, we are now over 65,000 strong and growing as we continue on our adventure to become a global world class retailer.”

Transaction Details

The Acquisition was financed by the proceeds from HBS Global Properties’ acquisition of 41 GALERIA properties.

Concurrently with the Acquisition, HBS Global Properties acquired 41 GALERIA properties at a capitalization rate of 5.5%, valuing the properties at €2.6 billion (C$3.9 billion). HBS Global Properties funded its acquisition of the GALERIA properties from the following sources:

  • A €1,338 million (C$2,007 million) 10 year Real Estate Loan with a fixed interest rate of approximately 2.9%,secured by the GALERIA properties;
  • US$179 million (C$232 million) in cash equity from Simon Property Group, as part of their total commitment of US$279 million to the joint venture;
  • US$246 million (C$320 million) in cash currently held at HBS Global Properties (excess proceeds from the US CMBS Loan transaction); and
  • US$1,061 million (C$1,379 million) in equity re-invested by HBC, of which between US$400 to US$600 million is expected to be sold to third parties, the proceeds of which will be used to reduce outstanding borrowings at HBC.

HBC’s equity investment in HBS Global Properties was largely funded by the drawdown of US$1,085 million from a 7 year Senior Term Loan B facility, which bears interest at LIBOR + 3.75% per annum(5). The remaining proceeds from the term loan were utilized by HBC for Acquisition related fees, taxes and other working capital requirements.

Following the conclusion of these transactions, HBC retains a 92% ownership stake in HBS Global Properties (88% after Simon Property Group’s full contribution for tenant improvements). The addition of the GALERIA properties brings the total value of the real estate assets owned by HBS Global Properties to approximately C$6.1 billion(6), at a blended capitalization rate of 5.75% based on the relevant closing transaction values.

HBC was able to close the Acquisition at the earliest possible date, and is in advanced discussions with multiple qualified institutional investors that have expressed interest in investing in HBS Global Properties equity, with interest in excess of US$1 billion. These parties are currently completing due diligence, and management believes it is on track to sell between US$400 and US$600 million of its HBS Global Properties equity, the proceeds of which will be used to reduce HBC’s outstanding borrowings. Any sale would reduce the Company’s interest in HBS Global Properties.

Financial Guidance for Fiscal 2015 and 2016

Looking forward, the Company expects Sales, Adjusted EBITDAR, and Adjusted EBITDA for fiscal 2015 and 2016 to increase significantly based on initiatives including:

  • The addition of GALERIA;
  • Benefits of the North American cost realignment program announced on September 29, 2015;
  • Continuing strategic investments in HBC’s digital business;
  • The opening of new stores in North America, which includes the introduction of Saks and Saks OFF 5TH to Canada; and
  • Continued improvement and ongoing growth of our North American operations.

Based on these factors, among others, management has provided the below guidance for fiscal 2015 and 2016. This guidance is fully qualified by the “Forward-Looking Statements” section of this press release.

Canadian Dollars     Fiscal 2015     Fiscal 2016
Sales     $11.0 to $11.5 billion     $14.5 to $15.5 billion
Adjusted EBITDAR     $1.3 to $1.375 billion     $1.725 to $1.875 billion
Adjusted EBITDA     $850 to $925 million     $950 to $1,100 million

Assumes the following: €1 = C$ 1.50 and US$1 = C$1.30 for fiscal 2015 and €1 = C$
1.50 and US$1 = C$1.32 for fiscal 2016

This sales forecast implies low single digit same store sales growth, calculated on a constant currency basis. Adjusted EBITDA guidance assumes the contribution of the Yorkdale, Scarborough Town Centre, and Square One (YSS) properties to an entity related to the RioCan-HBC Joint Venture, as well as the sale of between US$400 and US$600 million of equity in HBS Global Properties.

The closing of the Acquisition represents a major step in HBC’s journey to become a global world class retailer. The addition of GALERIA’s banners across two countries in Europe further strengthens HBC’s retail portfolio, and provides a platform for further growth. Combined, HBC now has over 65,000 employees and pro forma the Acquisition, anticipates annual sales of $14.5 to $15.5 billion in fiscal 2016, with improved debt ratios on the Company’s balance sheet in comparison to the beginning of the fiscal year.

HBC Financial Community Conference Call to Discuss Transaction

HBC’s management team will discuss the transaction during a conference call for the financial community today, September 30, 2015, at 8:30 am EDT. The conference call will be accessible by calling (877) 852-2926 or the international dial-in number (253) 237-1123. A live webcast of the conference call will be available on HBC’s website at: An audio replay will be available at this link through October 30, 2015.

Presentation slides for the conference call will be made available on the Company’s website located at

About Hudson’s Bay Company

Hudson’s Bay Company (TSX: HBC) is one of the fastest-growing department store retailers in the world, based on its successful formula of driving the performance of high quality stores and their all-channel offerings, unlocking the value of real estate holdings and growing through acquisitions. Founded in 1670, HBC is the oldest company in North America. With the recent completion of its acquisition of GALERIA Kaufhof Group, HBC’s portfolio today includes eight banners, in formats ranging from luxury to better department stores to off price, with more than 460 stores and 65,000 employees around the world.

In North America, HBC’s leading banners include Hudson’s Bay, Lord & Taylor, Saks Fifth Avenue and Saks OFF 5TH, along with Home Outfitters. In Europe, its banners include GALERIA Kaufhof, the largest department store group in Germany, Belgium’s only department store group Galeria INNO, as well as Sportarena.

HBC has significant investments in real estate joint ventures. It has partnered with Simon Property Group Inc. in HBS Global Properties Joint Venture, which owns properties in the United States and Germany. In Canada, it has partnered with RioCan Real Estate Investment Trust in the RioCan-HBC Joint Venture.

Forward-Looking Statements

Certain statements made in this news release, including, but not limited to, the benefits that are expected to result from the acquisition of GALERIA, growth opportunities for GALERIA as a result of contemplated strategic initiatives, the Company’s prospects for future European growth opportunities, the Company’s growth strategies of improving successful retail operations, unlocking the value of real estate and growing through acquisitions, HBC’s expectations with respect to selling equity at HBS Global Properties, and earnings guidance in respect of Sales, Adjusted EBITDAR and Adjusted EBITDA for each of fiscal 2015 and 2016, and other statements that are not historical facts, are forward-looking. Often but not always, forward-looking statements can be identified by the use of forward-looking terminology such as "may", "will", "expect", "believe", "estimate", "plan", "could", "should", "would", "outlook", "forecast", "anticipate", "foresee", "continue" or the negative of these terms or variations of them or similar terminology.

Implicit in forward-looking statements in respect of Sales, Adjusted EBITDAR and Adjusted EBITDA for fiscal 2015 and 2016, are certain current assumptions, including, among others, the Company achieving low single digit same store sales growth on a constant currency basis in each of fiscal 2015 and 2016, the Company realizing annualized cost savings and synergies during fiscal year 2016 totaling $75 million from the recently announced North American realignment program, the Company achieving $100 million in synergies from the continued integration of Saks Incorporated, the Company opening new stores in North America, the Company contributing the YSS Properties to an entity related to the RioCan-HBC Joint Venture later in 2015, the Company selling between US$400 and US$600 million of equity in HBS Global Properties, the Company maintaining a significant ownership interest in HBS Global Properties and the RioCan-HBC Joint Venture, and assumptions regarding currency exchange rates for each of fiscal 2015 and 2016. Specifically, we have assumed the following exchange rates: €1 = C$1.50 and US$1 = C$1.30 for fiscal 2015, and €1 = C$1.50; US$1 = C$1.32 for fiscal 2016. These current assumptions, although considered reasonable by the Company at the time of preparation, may prove to be incorrect. Readers are cautioned that actual future operating results and economic performance of the Company, including with respect to our anticipated Sales, Adjusted EBITDAR and Adjusted EBITDA for each of fiscal 2015 and 2016, are subject to a number of risks and uncertainties, including, among others described below, general economic, market and business conditions, changes in foreign currency rates from those assumed, the risk that the Company may not achieve same store sales growth on a constant currency basis, the risk that the Company many not achieve the contemplated cost savings and synergies as described above, and the risk that third parties may not invest in equity at HBS Global Properties at the anticipated values or amounts, and could differ materially from what is currently expected as set out above.

Although HBC believes that the forward-looking statements in this news release are based on information and assumptions that are current, reasonable and complete, these statements are by their nature subject to a number of factors that could cause actual results to differ materially from management's expectations and plans as set forth in such forward-looking statements for a variety of reasons. Some of the factors - many of which are beyond HBC’s control and the effects of which can be difficult to predict – include, among others: (a) the risk that the anticipated benefits and growth opportunities from the GALERIA acquisition cannot be realized; (b) the ability of HBC to retain and attract key GALERIA personnel and for GALERIA to maintain relationships with customers, suppliers and other business partners; (c) the risk that third parties will not enter into definitive agreements to invest in equity at HBS Global Properties and that such investment may not be completed at anticipated values or amounts, within the contemplated timing or at all; (d) the risk that HBC does not reduce its outstanding borrowings, (e) credit, market, currency, operational, liquidity and funding risks generally, including changes in economic conditions, interest rates or tax rates; and (f) risks and uncertainties relating to information management, technology, supply chain, product safety, changes in law, competition, seasonality, commodity price and business.

HBC cautions that the foregoing list of important factors and assumptions is not exhaustive and other factors could also adversely affect its results. For more information on the risks, uncertainties and assumptions that could cause HBC’s actual results to differ from current expectations, please refer to the "Risk Factors" section of HBC’s Annual Information Form dated April 30, 2015, HBC’s second quarter Management Discussion & Analysis dated September 10, 2015, as well as HBC’s other public filings, available at and at

The forward-looking statements contained in this news release describe HBC’s expectations at the date of this news release and, accordingly, are subject to change after such date. Except as may be required by applicable Canadian securities laws, HBC does not undertake any obligation to update or revise any forward-looking statements contained in this news release, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on these forward-looking statements.

Non-IFRS Measures

Unless otherwise indicated, all “$” dollar amounts are expressed in Canadian dollars, and other than in respect of fiscal 2016 Financial Guidance, the following exchange rates are assumed: €1 = C$1.50; US$1 = C$1.30.

EBITDA is a non-IFRS measure that we use to assess our operating performance. EBITDA is defined as net earnings (loss) before finance costs, income tax, share of net earnings (loss) in joint ventures, the gain on contribution of assets to joint ventures, the gain on the Queen Street property sale, non-cash share based compensation expense, depreciation and amortization expense, impairment and other non-cash expenses and non-cash pension expense. The Company's Canadian defined benefit pension plan is currently in a surplus position and as a result, pension expense is adjusted as management does not expect to make any payments in the foreseeable future. EBITDAR is defined as EBITDA before rent expenses to third-parties and the real estate joint ventures.

Adjusted EBITDAR is defined as EBITDAR adjusted to exclude: (i) business and organization restructuring/realignment charges; (ii) merger/acquisition costs and expenses; and (iii) normalizing adjustments, if any, related to transactions that are not associated with day-to-day operations. Adjusted EBITDA is defined as Adjusted EBITDAR less rent to third-parties, less cash rent to the real estate joint ventures plus cash distributions from the real estate joint ventures.

We have included EBITDA, EBITDAR, Adjusted EBITDAR and Adjusted EBITDA, to provide investors and others with supplemental measures of our operating performance. We believe EBITDA, EBITDAR, Adjusted EBITDAR and Adjusted EBITDA are important supplemental measures of operating performance because they eliminate items that have less bearing on our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures. We also believe that securities analysts, investors, rating agencies and other interested parties frequently use EBITDA, EBITDAR, Adjusted EBITDAR and Adjusted EBITDA in the evaluation of issuers, many of which present similar metrics when reporting their results. Our management also uses Adjusted EBITDA in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets and assess our ability to meet our future debt service, capital expenditure and working capital requirements and our ability to pay dividends on our shares. As other companies may calculate EBITDA, EBITDAR, Adjusted EBITDAR and Adjusted EBITDA differently than we do, these metrics are not comparable to similarly titled measures reported by other companies.

This press release makes reference to certain financial results expressed on a constant currency basis, including anticipated same stores sales growth. In calculating the same store sales change on a constant currency basis, prior year foreign exchange rates are applied to both current year and prior year same store sales. This enhances the ability to compare underlying sales trends by excluding the impact of foreign currency exchange rate fluctuations. Definitions and calculations of same store sales differ among companies in the retail industry.

Note: All quoted values other than 2016 Fiscal Guidance assume that € 1 = C$1.50; US$1 = C$1.30

(1) Based on management’s estimate, see “Financial Guidance for Fiscal 2015 and 2016”, “Forward-Looking Statements” and “Non-IFRS Measures”.

(2) For a reconciliation of Adjusted EBITDAR and Adjusted EBITDA to net income for fiscal 2014, please see the presentation slides regarding the Acquisition dated the date hereof, which will be available on the Company’s website at

(3) Enterprise value includes finance leases and €69 million minority interest to be acquired in the next several months, and excludes €324 million of pension liabilities that will be assumed by HBC as part of the Acquisition.

(4) Represents value of properties after all transactions are completed, including the post-closing acquisition of certain real estate properties and the minority interest, expected to occur within 6 months.

(5) Interest rate has a LIBOR floor of 1%.

(6) Based on Canadian dollar property values of $2.2 billion on U.S. properties from previously closed transaction with Simon Property Group, and $3.9 billion on GALERIA properties.


Hudson’s Bay Company
Investor Relations:
Media Relations:
Tiffany Bourré, 905-595-7184
Director, External Communications


Hudson’s Bay Company
Investor Relations:
Media Relations:
Tiffany Bourré, 905-595-7184
Director, External Communications