Hudson’s Bay Co. and Le Tote, a fashion rental subscription service, have entered into an agreement for Le Tote to acquire the Lord + Taylor department store chain.
In the process of setting the agreement, however, HBC retained a range of interests in the department store chain.
HBC asserted that Le Tote’s proprietary technology, data and innovation combined with Lord + Taylor’s traditional store footprint, e-commerce presence and merchandise selection will provide consumers with a new experience in the mid-market department store channel.
Under the terms of the agreement, Le Tote will acquire the Lord + Taylor brand and related intellectual property, and assume operations of 38 stores, digital channels and associated inventory. HBC 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. HBC will also 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, Hudson’s Bay’s real estate joint venture, retain ownership of all held and ground-leased Lord + Taylor real estate assets. For at least the initial three years, HBC will maintain economic responsibility for the rent payments owed by Lord + Taylor at Le Tote operated locations.
Starting in 2021, HBC and Le Tote will have options to reassess the Lord + Taylor store network, which may include HBC recapturing select locations to determine their highest and best treatment, including possible redevelopment into mixed-use properties.
The company added that Le Tote is in the process of securing financing for the full Lord + Taylor purchase price. HBC expects the transaction to close before the start of the 2019 holiday season, subject to satisfaction or waiver of closing conditions. If Le Tote has not obtained committed financing within 45 days following signing, HBC has the right to terminate the agreement, the company cautioned.
Helena Foulkes, HBC’s CEO, said, “We’re excited to have reached an agreement with Le Tote that creates a new model for Lord + Taylor, bringing together fashion rental subscriptions with traditional retail. 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. 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.”
Le Tote founder and CEO, Rakesh Tondon, said, “Since founding Le Tote, it’s been our mission to push the boundaries of retail. We’ve strived to lead the charge in developing innovative, intuitive, value-driven ways for customers to engage and consume. We’re excited to bring Le Tote together with Lord + Taylor, a storied brand that has stood for quality, style and service for nearly two centuries. With this acquisition, we continue our journey in creating the future of retail.”