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"We are excited about what this opportunity and being part of a much larger enterprise can mean for the future of the Saks Fifth Avenue brand," Saks Chairman and CEO Steve Sadove said in a statement.
News of the deal comes a little over a month after reports first surfaced that Hudson's Bay was interested in buying Saks.
Saks, which is based in New York City, will continue to run as a separate company under Hudson's Bay and will have its own merchandising, marketing and store operations employees. Key management personnel are expected to remain with the company. But it wasn't clear whether Sadove would be staying on.
In an email statement to The Associated Press, Saks spokeswoman Julia Bentley said "specific decisions about management and the organizational structure have not been made at this time."
Saks will have a 40-day period in which to seek out alternative third-party bids.
The buyout, which was approved by both companies' boards, is targeted to close before year's end. It still needs approval from Saks' shareholders.
Hudson's Bay Co. said that it will look at strategic options for the combined property portfolio, which could include establishing a real estate investment trust.
Hudson's Bay said it aims to save $100 million in operating costs in the first three years by combining distribution centers and other back-office facilities of Hudson's Bay and Saks Fifth Avenue.
After the market closed, Fitch Ratings placed Saks Inc. on "rating watch negative." The designation reflects the potential for an alternative bid, including interest from private equity, which could lead to a leveraged buyout. Piling up debt in such a transaction would have negative rating implications, Fitch said. The ratings agency said it expects to withdraw the store's ratings once the Hudson's Bay deal closes.
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