Offering $16 per share at a 30 percent premium over levels for May, HBC HBC (NYSE:HBC) , operating as Lord & Taylor in the U.S. and Hudson Bay in Canada.
The Saks shares rose to $15.87 in premarket trading and 3.4 percent.
Paying up to $2.9 billion and cash, HBC is also assuming all of Saks’ debt.
The deal is anticipated to be closed by the end of 2013.
There is a 40-day “go-shop” period when Saks can seek better bids, but the company said it did not expect
Saks is most known for the Fifth Avenue store in Manhattan and will operate as a separate entity in HBC with its own merchandise and marketing, keeping the New York headquarters.
Richard Baker, HBC Chief Executive Officer stated that he wanted to open Saks department stores in Canada.
This will bring competition for Nordstrom (NYSE:JWN) and Holt Renfrew which is opening in Canada in 2014.
The combination company will have stores in Toronto, Montreal and New York and considered a real estate investment.
The original Saks’ Fifth Avenue opened in 1924 with sales of $600 per year, making it work around $1 billion.
Saks has recently closed locations in Dallas, Oregon and Portland, now having 41 stores and 67 outlets.
Saks reduced prices in 2008 due to falling prices and took three years to regain full priced items.
The two biggest shareholders are Italian businessman Diego Della Valle and Mexican billionaire Carlos Slim.
The deal will be financed by HBC with $1 billion in new equity, $400 million in senior unsecured notes and $1.9 billion in senior secured loans.
The lead financial advisor for HBC is Bank of America Merrill Lynch (BAC.N) and RBC Capital Markets (RY.TO).
The Saks financial advisers include Goldman Sachs (GS.N), Guggenheim Securities and Morgan Stanley (MS.N) with Wachtell, Lipton, Rosen and Katz providing legal counsel.