San Francisco fashion rental subscription service Le Tote is acquiring the Lord & Taylor department store chain for $100 million from Hudson”™s Bay Co.
Under the terms of the agreement, Le Tote will acquire the Lord & Taylor brand and related intellectual property while assuming operations of 38 stores ”“ including those in Danbury, Stamford and Trumbull in Fairfield County, and in Scarsdale and Yonkers in Westchester ”“ L&T”™s digital channels and associated inventory.
Le Tote said it expects to extend employment offers to “the vast majority” of L&T employees.
Hudson”™s Bay Co. will receive $75 million in cash upon the transaction”™s closing and a secured promissory note for $25 million payable in cash after two years. In addition, HBC will receive an equity stake in Le Tote, two seats on its Board of Directors and “certain rights as a minority shareholder.”
HBC and HBS Global Properties, HBC”™s real estate joint venture, will retain ownership of all owned and ground-leased real estate assets related to Lord & Taylor. For at least the initial three years, HBC has agreed to maintain economic responsibility for the rent payments owed by Lord & Taylor at the locations operated by Le Tote.
Net of HBC”™s distributions from HBS Global Properties, HBC expects to continue to be liable for approximately $77 million in Lord & Taylor total cash rent on an annual basis.
In fiscal 2018, L&T represented $1.4 billion of HBC”™s $9.4 billion in retail sales. HBC”™s 2018 Adjusted EBITDA was $462 million, which reflects a $119 million loss attributable to L&T, inclusive of allocated corporate expenses.
Starting in 2021, HBC and Le Tote will have options to reassess the Lord & Taylor store network, which the companies said may include “HBC recapturing select locations to determine their highest and best use, including possible redevelopment into mixed-use properties with a variety of services, experiences and retail offerings.”
For any recaptured or returned stores, HBC will retain long-term rent responsibility, risk and costs for redevelopment.
“Following an extensive review of strategic alternatives, Le Tote”™s leadership and innovative approach is the best path forward for Lord & Taylor, its loyal customers and dedicated associates,” said HBC CEO Helena Foulkes. “For HBC, this transaction builds upon our previous bold actions, further enabling us to focus on our greatest opportunities, Saks Fifth Avenue and Hudson”™s Bay.”
The transaction is expected to close before the start of the 2019 holiday season, subject to satisfaction or waiver of closing conditions. If committed financing has not been obtained within 45 days following signing, HBC has the right to terminate the agreement.
