Department Store Woes (Sears, HBC, Ailes)

[samsonyuen]

Not in Toronto (now anyway), but could this mean an entry outside of Québec?
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Friday » July 29 » 2005
Ailing Les Ailes on point of sale
'Cheap chic' retailer to buy high-end fashion chain

Hollie Shaw
Financial Post

Friday, July 29, 2005

The owner of fashion chains Fairweather and International Clothiers is in advanced talks to acquire high-end Quebec department store chain Groupe Les Ailes de la Mode Inc., the Financial Post has learned.

"It's basically a done deal," said a source close to the negotiations. "They are at the stage of landlord approvals."

News that Isaac Benitah, a godfather of 'cheap chic' fashion in Canada, is about to buy the troubled luxury retailer has sent shock waves through Montreal's fashion circles, given the once lofty aspirations of Les Ailes.

"[Mr. Benitah] is the personification of a great mass merchant," said Anthony Stokan, partner at retailing consultancy Anthony Russell and Associates.

"He is to fashion what a fast-food outlet is to food: He takes the hottest look of the moment, knocks it off, and sells it at the cheapest price. And Les Ailes is the antithesis of that."

Mr. Benitah could not be reached yesterday. A Les Ailes spokesman had no comment.

The news all but closes the door on a retail concept described by apparel market consultant David Howell as "a great idea at the wrong time."

Les Ailes was the dream project of Paul Delage Roberge, the jewel in the crown of his 200-store retailing empire Les Boutiques San Francisco Inc., which operated nine chains including Bikini Village, Frisco, West Coast, Victoire Delage and San Francisco.

It was conceived as Canada's answer to the U.S. retailer Nordstrom, an old-fashioned department store with luxurious wares, high-end service and a grand piano. The first three Quebec outlets were a success, averaging more than $450 in sales per square foot, and Mr. Roberge wanted to expand the concept across Canada.

But a venture in Ottawa failed in 2003 after two disappointing years, and an ambitious 225,000-square foot flagship store in downtown Montreal touched off a financial crisis within the Boucherville, Que.-based company. The retailer began to close stores and sell off its banners in 2003, and Mr. Roberge stepped down as chief executive while staying on as chairman.

After losing $60.2-million in the year ended Jan. 31, 2004, it was renamed and reorganized as Groupe Les Ailes de la Mode Inc. and emerged from seven months of creditor protection last year after 30 investors injected $19.2-million in new financing.

Four of the original eight Les Ailes stores remain open, and the Montreal outlet has been cut to a third of its former size. The investors recently supplied another $3.2-million.

One industry source said Mr. Benitah, who runs more than 200 stores across Canada under the banners Fairweather, International Clothiers and Randy River, is interested in relaunching the Les Ailes chain as an off-price retailer in the vein of Winners. Another source said Mr. Benitah would continue to operate the current Les Ailes format in order to access $50-million in tax losses that are an integral part of the deal and to comply with lease restrictions at some higher end locations, including the old Eaton centre property in downtown Montreal. Bikini Village is not part of the negotiations, sources said.

Industry players believe that in order for the remaining Les Ailes stores to survive, they will have to appeal to customers who are more interested in low prices than in high fashion.

"Small department stores are probably the most complicated retail category in Canada right now," Mr. Stokan said. "That customer has really gone to big-box stores and players like Winners, who are now going into the downtowns of Canada."

Groupe Les Ailes is now under the stewardship of David Margolis, founder of the Winners chain, who himself seemed to concede this point at the retailer's sparsely attended annual meeting last week.

Les Ailes is starting to see improvements from a recent move into "value-priced" fashions for middle to high-end consumers, he noted, adding Canadians are more selective in their purchases than they used to be due to squeezed disposable incomes.

The retailer is still struggling. Its stock trades at less than a tenth of its value five years ago, and it reported a loss from continuing operations of $2.8-million, or 17 cents a share, for the first quarter ended April 30. Sales dropped almost 15% to $22.8-million from $26.8-million in 2004. Sales at the 59-store Bikini Village chain fell 5.5% and the Les Ailes stores posted a 20.5% drop. Mr. Margolis said both Les Ailes and Bikini Village should be profitable in the third or fourth quarters of this year.

 

[samsonyuen]

Re: Eaton Centre

Maybe we'll be seeing a Les Ailes roll out to Toronto?
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Wednesday » August 10 » 2005
Les Ailes stores get new owner
Fairweather Group pays $6.2 million. Sale does not include swimwear division; Margolis resigns as president and CEO

SHEILA MCGOVERN
The Gazette

Wednesday, August 10, 2005

The struggling Les Ailes de la Mode stores have been sold to the Fairweather Group in Toronto for $6.2 million, and retail analysts said it might be for the best.

The sale was not a surprise. Les Ailes de la Mode Inc. acknowledged more than a week ago that it was negotiating with the Toronto group, headed by Isaac Benitah.

The four stores - based in Montreal, Laval, Brossard and Ste. Foy - were to have been the pride of a retailing empire built by Paul Roberge in a rebirth of the luxurious department store. But they never took flight, and they dragged down the rest of his empire. In December 2003, the company had to seek protection from its creditors and sell a few of its banners, including the San Francisco chain on which it had been founded.

It emerged from bankruptcy protection with only Les Ailes and its swimwear division, which includes 50 Bikini Village and Ocean Bikini stores. At its annual meeting on July 21, the company said it still wasn't making money.

In announcing the sale, which does not involve the swimwear division, Les Ailes president David Margolis said that "on its own, the Les Ailes department stores would have required significant capital investments to remain viable in the long term."

By selling the stores to Fairweather, they "will benefit from the scale, purchasing power and relationships as well as the synergies that a large retailer can bring," he said. "Les Ailes' concept will continue under new leadership while recognizing its important impact on the Quebec retail market."

Benitah said he was excited about the purchase and that "with over $75 million in revenues and 630 employees, Les Ailes has a solid foundation from which we can build."

Fairweather will "continue to use the existing vendor base as well as adding new suppliers, which will broaden the appeal to customers and provide an enhanced platform for future success and growth," he said.

Benitah has been dubbed the "godfather of cheap chic," and there was speculation he would relaunch the chain as an off-price retailer like Winners.

However, three retail analysts contacted by The Gazette doubt that will happen.

"He absolutely should not do that," said Richard Talbot of Talbot Consultants International. Then he'd be competing with himself. A retailer can own a variety of stores "and maybe inside every low-end retailer there is also a high-end retailer."

Even though his stores would not carry the same merchandise, they would all benefit from combined supply, distribution, marketing and computer services, Talbot said.

And Quebec is the ideal market for a concept like Les Ailes, Talbot added. Though small department store chains are rare in the rest of Canada, Ste. Catherine St. has three - Les Ailes, Simons and Ogilvy - and the population remains fashion-conscious, he said.

David Howell of Associate Marketing International said low-end retailers are doing well, as are high-end retailers like Holt Renfrew and Harry Rosen. But the middle ground is not well served, he said, and Benitah has the expertise to capture that ground in Quebec and expand. "He understands the rest of Canada - Paul (Roberge) did not."

Ed Strapagiel of Kubas Consultants said many Canadian shoppers still want quality, and there probably is a stake to be claimed somewhere between The Bay and Holt Renfrew.

Benitah's empire has the reputation of being a tight operation, while Roberge "was probably not watching the nickels and dimes," Strapagiel said, and it also goes in for heavy marketing and promotion. "They are merchants who go out and hustle."

Roberge ran into trouble trying to expand too quickly, planning three stores in about a year, Strapagiel said. The Pointe Claire store never opened, the Ottawa stored closed, and the downtown Montreal store had to be chopped to a third of its size. When people run into financial difficulty, they cut back on advertising expenses, but you just can't do that in fashion. he said.

All agreed the tough nut to crack will be reviving the downtown Montreal store buried in the back of the old Eaton building. It has been a confusing store and tough to find, and it was the major contributor to Roberge's financial woes.

The Eaton building is owned by the Caisse de depot et placement du Quebec, the province's giant pension find manager. A spokesperson said yesterday the store was doing "business as usual" despite the sale.

Margolis, who founded the Winners chain, said he feels a sense of accomplishment at having stabilized Les Ailes, and is resigning as CEO and president. Leslie Glazerman, who has been Les Ailes' interim chief financial officer, will assume the title of interim chief executive officer.

The companies said the $6.2-million price tag is subject to certain adjustments, and $4.2 million was paid at the close yesterday, with the remaining $2 million to be paid in instalments in October, December and February.

 

[samsonyuen]

Sears could be worth more, but would Lampert pay it?
Investors think he'd boost value: analyst

MARINA STRAUSS
RETAILING REPORTER
Hedge fund giant Edward Lampert is his own worst enemy in trying to persuade shareholders to back his $835-million offer to take Sears Canada Inc. private, industry observers say.

That's because the controlling shareholder of U.S. parent Sears Holdings Corp. is seen as a savvy businessman who can improve the Canadian division, and increase its value, retailing analyst George Hartman at Dundee Securities Corp. said. Shareholders figure the company will be worth more than the offer -- and want to stick with him rather than bail out. Already the parent is performing better in his hands.

"They think Mr. Lampert is an investment genius," Mr. Hartman said of the man who has made a lot of money for others and engineered the takeover of both Kmart and Sears.

Mr. Hartman and others predict that Mr. Lampert will dig in his heels and refrain from boosting his $16.86-a-share offer despite opposition from some key -- and powerful -- shareholders.

Yesterday, Sears Holdings extended the offer until March 31. It had only managed to increase its 54-per-cent stake in Sears Canada by 9.5 percentage points, giving it just over 63 per cent of the Canadian division's shares.

Mr. Lampert is playing hardball. Sears Holdings said it will appoint a majority of insiders to the Sears Canada board of directors; currently, the majority are independent directors, but all six said they will not run for re-election at the annual meeting this spring, an apparent protest over how they felt they had been browbeaten by the parent.

Moreover, Mr. Lampert said that Sears Holdings will push to end the Canadian unit's 6-per-cent quarterly dividend if it fails to acquire a majority of the minority Sears Canada shares. That would mean dropping about $25.8-million in annual dividends, including roughly $16.3-million for the parent.

The company argued that Sears Canada "will face an increasingly competitive Canadian retail environment without the financial and operating benefits of being owned 100-per-cent by Sears Holdings" if the offer is unsuccessful."

The parent has criticized the Canadian operations for their weak performance in recent years, although it enjoyed a much improved fourth quarter in 2005.

Sears Holdings believes its offer represents "a full and fair price," vice-chairman Alan Lacy said in a statement, adding the company does not intend to extend the offer again if a majority of the minority investors fail to back the deal.

But some analysts continue to counsel investors not to tender to the offer. And Sears Canada's share price suggested they would not: On the Toronto Stock Exchange, the shares remained well above the offer, rising 5 cents to close at $18.05.

Ron Mayers, head of alternative strategies at Desjardins Securities, said shareholders voted "a resounding no" to the bid and will probably balk at anything less than between $19 and $20 a share.

Sears Holdings' takeover attempt has revealed a rift between the Sears parent and its Canadian unit. In February, Sears Canada's board of directors recommended against the parent's offer, saying it was too low. The rejection was based on an opinion from adviser Genuity Capital Markets, which valued Sears Canada at between $19 a share and $22.25 a share. A few weeks later, the independent directors signalled they would step down.

Last week, Sears Holdings said that most of the senior executives at Sears Canada were tendering to the offer, or selling their shares. Nevertheless, two large shareholders, Vornado Realty Trust and Pershing Square Capital Management LP, have resisted the offer.

 

[samsonyuen]

Sears parent claims win
Apr. 6, 2006. 11:34 AM
CANADIAN PRESS

Sears Holdings Corp. (Nasdaq: SHLD) declared victory Thursday in its sweetened $18-per-share bid to buy out minority stockholders of Sears Canada Inc. (TSX: SCC), but at least one holdout investor suggested the fight is not over.
The Chicago-based retailer said it has secured commitments for more than half of the 46.2 per cent of the Canadian subsidiary that it didn’t already own when it launched its privatization bid late last year.

It wasn’t immediately clear whether Sears Holdings had reached the 90 per cent threshold that would enable it to force the Toronto-based company to be delisted from the Toronto Stock Exchange.

“They are talking about it as if it is over and I’m not sure that that is the case,†said Ron Mayers, head of alternative strategies at Desjardins Securities Inc., which holds Sears Canada shares.

“I think probably there’s another shoe to drop here.â€

America’s No.3 retailer had insisted Wednesday that the $18-per-share offer — bolstered Monday from $16.86 and valuing all of Sears Canada at more than $1.9 billion — was “its best and final offer.â€

But Sears Canada shares continued to trade above the offer price, closing Wednesday at $18.59 and trading after Thursday’s announcement as high as $18.50, changing hands late in the morning at $18.27.

Independent directors of Sears Canada had opposed the initial bid from Sears Holdings, created a year ago in the $11-billion (U.S.) merger of Sears Roebuck and Kmart under hedge-fund magnate Edward Lampert.

But Sears Holdings warned that if its proposal was rejected, ``Sears Canada will face the increasingly competitive Canadian retail environment without the financial and operating benefits of being owned 100 per cent by Sears Holdings†and it would stop paying dividends.

The offer was set to expire April 18, but Sears Holdings said Thursday it will be extended to Aug. 31 and the going-private transaction is expected to close in December.

“We are pleased that our transaction has received the support of a majority of the minority shareholders, including the two largest minority shareholders,†stated Sears Holdings vice-chairman Alan Lacy.

“With the success of our offer assured, we expect other Sears Canada shareholders to tender their common shares in order to promptly receive our offer price of $18.00 Cdn per share.â€

Sears Holdings, with $55 billion (U.S.) in annual sales at 3,900 stores in the United States and Canada, now will “work to levrage the strengths of our two companies.â€

 

[samsonyuen]

From: www.theglobeandmail.com/s...iness/home
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Sears investors eye HBC
Canadian Press
Toronto — In a continued spat over Sears Holdings Corp.'s attempted buyout of Sears Canada Inc., a group of minority shareholders contesting the bid have floated the idea the retailer could be combined with competitor Hudson's Bay Co.

The group of shareholders, led by Pershing Square Capital Management LP, on Wednesday rejected a statement earlier this week from Sears Canada's Chicago-area parent company accusing them of attempting to push up the price of the takeover offer.

They also suggested that “based on a conversation with a former Hudson's Bay Co. senior executive, Pershing believes that a business combination between Hudson's Bay and Sears Canada could yield an additional $300-million of savings from the combined enterprises.â€

The minority group did not identify the former executive.

On Monday, Sears Holdings vice-chairman Alan Lacy accused “Pershing and some other U.S. speculators†of delaying the proposed acquisition “in an attempt to extract a premium on shares they purchased recently at prices close to the final offer price of $18 per share.â€

The minority shareholders, who also include Hawkeye Capital Management LLC and Knott Partners Management LLC, reiterated in a release that they believe the sweetened Sears Holdings offer of $18 a share undervalues the Canadian firm.

It accused Sears Holdings of being “motivated by its desire to squeeze out minority shareholders at a price that is a small fraction of the fair value of Sears Canada before including any synergies that can be obtained through 100 per cent ownership by Sears Holdings.â€

The group noted that each member has held Sears Canada stock since early 2005, “more than one year before Eddie Lampert, chairman of Sears Holdings, attempted to acquire his first share of Sears Canada in the recent bid.â€

“Members of the minority group intend to remain long-term holders of Sears Canada as a publicly traded company if they are successful in defeating the minority squeeze out transaction,†it added.

Pershing Square values Sears Canada stock's fair value at between $41.21 to $46.67 per share.

Sears Holdings Corp. is the third largest broad line retailer in North America, with approximately $55-billion in annual revenues, and 3,900 full-line and specialty retail stores in the United States and Canada.

 

[21stcenturymichael]

In a continued spat over Sears Holdings Corp.'s attempted buyout of Sears Canada Inc., a group of minority shareholders contesting the bid have floated the idea the retailer could be combined with competitor Hudson's Bay Co.

I know this potential merger has been on the radar for a while, but it just occurred to me how shocked/incredulous someone from 1950s Canada would be if they knew that in (say) 2007, Eaton's, the Hudson's Bay Company, Simpson's and Simpsons-Sears were all the same company.

 

[andreapalladio]

As shocked as they would be to discover that women work, first nations people vote, homosexuals marry. The world changes a lot in 50 years.

 

[21stcenturymichael]

As shocked as they would be to discover that women work, first nations people vote, homosexuals marry. The world changes a lot in 50 years.

I think many of them would be more surprised that Eaton's went out of business. I'm only half joking.

 

[samsonyuen]

From: www.theglobeandmail.com/s...iness/home
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Titans collide in battle for Sears Canada

ANDREW WILLIS
From Saturday's Globe and Mail
E-mail Andrew Willis
| Read Bio

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For two guys who just doubled their money on Sears Canada — a $300-million score — Jacques Chartrand and Claude Boulos can sure point to a lot of things wrong at the retail chain.

As the heads of Natcan Investment Management's $6.5-billion Canadian equity fund, the two money managers helped kick off the bitter takeover battle for Sears Canada by agreeing to sell their 9.7-million-share stake in the stores to its U.S. parent. Natcan headed for the exits in return for $16.86 a share, and was thrilled at the price. “Same-store sales keep falling. Canadians are going to the power centres, to big-box stores, so the traffic is going down at the malls where you find Sears,†says Mr. Chartrand, ticking off challenges facing the venerable retailer. “Management has tried different approaches, nothing has worked, and they are a bit complacent. I mean, this has got to be the last North American retailer with its own fleet of trucks.â€

Given their pessimistic outlook, the Natcan team was all ears when they got a call last November from William Crowley, chief financial officer at Sears Holdings Corp., the U.S. parent of Sears Canada, and a partner in its controlling shareholder, ESL Investments, a $15-billion (U.S.) hedge fund run out of Greenwich, Conn., by billionaire Edward Lampert.

Backing up Mr. Crowley in presentations before the Sears Canada board, the Natcan executives had already helped push the $2.2-billion (Canadian) sale of Sears Canada's credit card division, and a subsequent $2-billion special dividend.

After three weeks of “tough, creative negotiations,†Natcan agreed to sell its 9-per-cent stake — acquired over two years ago for $150-million — to Sears Holdings. That set the stage for the parent firm's offer for the rest of the company. The moment that bid was announced, there was a flood of investors who play on the theory that motivated buyers such as parent companies will invariably dig deep, and improve their opening bid to get a deal done. The most sophisticated of these players are known as arbs, or risk-arbitrage hedge funds.

“We got a fair price, plus protection if a second bid was made,†Mr. Boulos says. “The arbs, they poured in because the statistics show that they can get a 10- to 15-per-cent bump in the bid.â€

The arbs drove Sears Canada stock over $18, where it has remained since December. In April, Sears Holdings did improve its offer to $18 and won support from other major investors, with Natcan also getting the sweetened price. But at that point U.S. hedge fund Pershing Square Capital Management LP went on the offensive.

After buying shares at around $18, Pershing began making strident arguments that the Canadian chain is worth up to $46 a share. On the phone with Montreal-based Natcan, you can almost hear a Gallic shrug as Mr. Boulos says: “They can always dream.â€

Just about every takeover of a Canadian subsidiary by a foreign parent — and there have been more than a dozen in the past decade — has seen tension between minority shareholders and the buyer. Occasionally, takeover bids don't get improved, and arbs get hammered, as they did when Rogers Communications dropped an offer for its wireless unit. Sometimes, the arbs clean up, as witnessed in the bidding war for Dofasco.

But no takeover has approached the flat-out nastiness of the Sears Canada fight. Hedge funds now control trillions of dollars and have become a major factor in capital markets around the globe. In Canada, we are finding out what happens when two of these powerful players go toe-to-toe.

This battle has grown so ugly that some combatants have withdrawn from the field. Sears Canada's independent directors quit the company rather than endorse the $18 offer. Said one source close to the board: “We just weren't going to be pushed around.†On Tuesday, there will be a meeting at which Mr. Lampert is poised to get full control of the board.

Bystanders are being wounded. Sears Holdings unleashed its lawyers at Osler Hoskin & Harcourt to wring an apology from Ron Mayers, head of alternative strategies, at Desjardins Securities who questioned the takeover tactics. Regulators are also being summoned. When Pershing Square and its allies dragged the Ontario Securities Commission into the fray, Sears Holdings shot off a press release asserting the hedge funds are trying to “change the law to bail them out of their mistake.â€

Pershing Square, run by New York-based William Ackman, responded with its own release, labelling the assertions “vituperative.†That means abusive. That nine-page missive also referred to Mr. Lampert as “Eddie.†Friends can use the nickname. Coming from Pershing Square, sources close to ESL said it was an attempt to get under Mr. Lampert's skin.

The battle of egos, and thesauruses, is about more than chest-thumping by money managers.

Both Mr. Ackman and Mr. Lampert know their ability to do successful deals in the future — to sway boards or raise money — depends in part on burnishing their reputations as winners at Sears Canada. One source close to ESL said: “Lampert doesn't ever want to be known as a guy who rips off public shareholders. He's likely to be in Sears Holdings for a long time, and he plans to be in business a long time.â€

The rhetoric has grown louder as Pershing Square suffers setbacks. In fact, Mr. Ackman may eventually lose out because he was too clever for his own good.

Pershing Square directly owns 5.6 million Sears Canada shares, bought after the takeover was launched. But the fund also bought 5.3 million shares last year. To legally avoid paying about $20-million in Canadian tax, it entered into what is known as a swap agreement. That deal saw Pershing Square hand over its 5.3 million Sears Canada shares to a Florida bank, SunTrust Banks Inc. In exchange, the fund got a note that entitled it to any future increase in Sears Canada's share price.

The only downside to this swap was Pershing gave up the right to vote the shares. But in a number of interviews, Mr. Ackman said market convention would see those 5.3 million shares either voted his way, or at least not voted at all.

Executives at several Canadian bank-owned dealers, all of whom routinely do these tax-based transactions on dividend-paying stocks, say Mr. Ackman has it wrong. The owner of the shares must be free to vote as it sees fit, they say — otherwise, the swap agreements might be considered tax fraud.

So who ended up owning the shares that Pershing Square swapped? That's a hotly debated subject. Pershing Square says the block ended up with Bank of Nova Scotia, an allegation both the bank and Sears Holdings deny. Mr. Ackman's best hope of torpedoing this takeover lies in attacking Scotiabank's role.

For what no one disputes is that the bank bought 4.5 million Sears Canada shares as part of a tax-driven trade. When Scotiabank decided to tender its big block to the $18 bid, it paved the way for Sears Holdings to squeeze out the remaining minority investors.

The other fact that's not in question is that Sears Holdings struck its deal with Natcan, then hired Scotiabank's investment dealer arm, Scotia Capital, as adviser on its takeover offer. Sears Holdings sources say they had no clue the bank owned Sears Canada shares, and point out that they also interviewed Merrill Lynch and BMO Nesbitt Burns for the job.

Scotiabank spokesman Frank Switzer said the two arms of his bank acted “with the utmost integrity.†But the two roles in this takeover opened the door for Pershing Square to claim Scotiabank had a conflict of interest. If Pershing Square can persuade the OSC to somehow toss out Scotiabank's 4.5 million votes, then Sears Holdings is no longer able to roll up the rest of the minority shareholders. To make the whole thing even more delicious, the chairman of the OSC is former Scotia Capital chief executive officer David Wilson.

For all its troubles, Scotia Capital stands to earn the Bay Street equivalent of minimum wage. The investment bank only stood to make a lucrative success fee — in the $3-million range — if Sears Holdings was able to get the chain for the opening bid of $16.86, according to sources at the bank and the American company. With the offer now at $18, Scotia Capital will receive a far more modest stipend. Short of a major reversal at the hands of the regulators, Sears Holdings will take over its Canadian subsidiary early in the new year. A prolonged court fight with Pershing Square is cheaper than an improvement on the $18 bid, sources at Sears Holdings say.

What happens next — how Sears will beat back Wal-Mart and a planned Canadian invasion by archrival Lowe's Cos. Inc. — is the subject of enormous debate in retail circles.

Pershing Square pushes the idea of a merger with the troubled Bay and Zellers chains, which were recently taken private by American investor Jerry Zucker. An investment banker who has been through the books of both the Bay and Sears Canada says that while there's no point in putting the chains together, “once everything is private, you're going to see all sorts of wheeling and dealing with the Bay and Sears stores. You'll see Loblaws buy 25 locations, Shoppers, Canadian Tire, even Wal-Mart will buy a few.â€

The investors who did so well with Sears Canada as a public company say it now makes business sense to say goodbye. Natcan's Mr. Chartrand says: “The next step has to be as a private company. Do that, and you can better deploy capital, you can combine te two companies' purchasing for more clout with suppliers, and combine merchandising. But it has to be private.â€

 

[samsonyuen]

From: www.theglobeandmail.com/s...iness/home
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Zucker's vision for HBC: Think Macy's
MARINA STRAUSS
From Friday's Globe and Mail
Jerry Zucker offered suppliers his vision of Hudson's Bay Co. this week — and a lot of it looks like Macy's.

The new U.S. owner wants to make the Bay a more distinctive department store retailer, even replacing plastic shopping bags with paper bags and tissue paper. He wants to stock the stores with brands that aren't available at HBC's Zellers or Home Outfitters — or anywhere else — and he's already adding more staff on the sales floor.

He envisages a chain that emulates the venerable Macy's in the U.S., a destination for exclusive products and attentive service.

In addition, he is stocking HBC stores with merchandise geared to neighbouring ethnic communities.

These are some of the points that surfaced at an invitation-only, $250-a-head meeting for HBC suppliers Mr. Zucker and his executives hosted at the Mississauga Convention Centre on Wednesday, according to some vendors who attended.

They described the low-profile U.S. businessman as charming and engaging. He started the session by insisting that the information remain confidential, reminding the 1,500 or so attendees that he is a very private person and his company is no longer public. He asked anyone with a tape recorder to turn it off, and “stopped once to make sure no one was recording,†one source said.

“He came across as very sincere,†said another source — who, like others, asked not to be named. “He knows how to talk to people.... He's very approachable.â€

Another source added: “He seemed upbeat.â€

In addresses by Mr. Zucker and his team, the suppliers found out that he considers ethnic communities a growth opportunity for HBC and wants to stock each store with goods that cater to the local residents.

He himself immigrated to the United States from Israel, and understands newcomers' difficulties in trying to shop in unfamiliar territory.

An HBC store in Brampton is already stocking more food and other merchandise that will appeal to residents in the surrounding neighbourhood, which includes many people from India and Pakistan.

At another store, a sales woman at the fragrance counter is making a point of speaking Chinese to customers of that background — producing some record sales, the meeting was told.

Mr. Zucker has other items on his to-do list. He plans to transform HBC's Western Canadian discounter, Fields, into a national dollar-store-like chain, while expanding Home Outfitters and the fledgling Designer Depot.

He wants HBC suppliers to take more responsibility, and more risk, for how their products fare in the stores and plans to hook them up to computer systems to feed them detailed data on their sales at each outlet. Taking a page from the books of many large U.S. retailers, he expects suppliers to manage their inventory, taking back unsold merchandise after a certain period, and replenishing shelves when needed.

Store managers should also have more power to order products as they see fit.

Mr. Zucker believes spending on television and newspaper ads should be reduced in favour of direct marketing, taking advantage of the rich database of customer information gleaned by the company's loyalty program.

He even suggested that HBC charge higher prices on goods in remote areas to make up for high costs of shipping the goods there, one supplier said.

He also provided reassuring news for anxious suppliers about getting credit coverage for goods they ship to HBC, telling them to contact two of the banks that helped finance his $1.1-billion acquisition of HBC earlier this year. They have divisions that provide credit coverage for suppliers.

Several suppliers complained that Mr. Zucker had charged $250 a person for up to four people from each company to attend the conference. In addition, he charged $50 for a store tour and $75 for any other company members to show up at the reception following the meeting. It lasted about 2½ hours, with a band, open bar and hors d'oeuvres afterward, attendees said.

“How can they have the gall to have a vendors' conference and charge the vendors for attending?†one supplier asked rhetorically before the meeting. “This at a time when vendors are nervous an looking for reassurance.â€

 

[samsonyuen]

From: www.thestar.com/NASApp/cs...9048863851
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Ruling blocks Sears takeover
Secret bank deals improper, OSC saysU.S. bidder plans court challenge
Aug. 9, 2006. 06:37 AM
DANA FLAVELLE
BUSINESS REPORTER

Sears Holdings Corp. says it will appeal a regulatory decision that has effectively killed its $18 a share offer for Sears Canada.
The move came late yesterday after the Ontario Securities Commission ruled Sears Holdings' offer violated provincial disclosure laws and could not go ahead.
The company broke the rules when it made secret deals with some shareholders, including two major Canadian banks, in exchange for their support, the regulators said.
The banks were cleared of any wrongdoing.
The regulators left the door open for Sears Holdings to come back with a new offer, but observers said the company's value-conscious chairman Ed Lampert might be unwilling to raise his price.
"Sears Holdings is disappointed with the decision," company spokesperson Chris Braithwaite said in a statement late yesterday. "We believe that we, as well as the Canadian banks who agreed to support the transaction, acted in full compliance with Ontario securities laws."
The U.S. retailer, which already owns more than 50 per cent of Sears Canada, said late yesterday it would appeal the ruling to the Divisional Court of Ontario.
The statement was just the latest in a series of tough tactics the Lampert-led company has employed since launching its takeover bid last December at $16.86 a share. Lampert wants to take Sears Canada private, which will cut company costs.
After less than 10 per cent of minority shareholders accepted the offer, Lampert was forced to sweeten the bid last April to $18 a share. That still fell $2 to $3 a share below what Sears Canada's then independent board of directors said was fair.
But Lampert said he had most of the votes sewn up in so-called "support agreements" with certain unnamed shareholders.
Three powerful U.S. hedge funds protested to Ontario regulators, who agreed that Sears Holdings should have disclosed the terms and conditions of those agreements.
During a three-day hearing last month, the commission learned that Sears Holdings had offered to delay the closing date to the end of the year, a measure that would save the Royal Bank of Canada and Bank of Nova Scotia about $122 million in taxes.
The commission also ruled that a separate deal Sears Holdings made with U.S.-based real estate firm Vornado Realty Trust should have been disclosed.
The banks were cleared of any wrongdoing, including allegations that the Bank of Nova Scotia was in a conflict of interest situation as it was advising Sears Holdings while owning Sears Canada shares.
The regulators' decision represented a major victory for three U.S. hedge funds, led by William Ackman of Pershing Capital Management LLC, which had complained to the regulators.
Ackman said he felt "vindicated" by the decision, adding that "it will benefit all of the minority shareholders in Sears Canada."
Market watchers agreed the decision sends an important signal.
"There's no doubt this is a black eye for Sears Holdings," said Ramy Elitzur, a professor of financial analysis at the University of Toronto's Rotman School of Management. "The OSC took it on and basically stopped the merger."
Sears isn't the only Canadian company with an unequal share structure, Elitzur said. Too often, minority shareholders are treated unequally in deals like this, he said.
The Bank of Nova Scotia said it was pleased with the findings. "The OSC found that Scotia Capital and the bank of Nova Scotia weren't involved in any conflict of interest," said bank spokesperson Frank Switzer.
Both the bank and its subsidiary Scotia Capital were involved on opposite sides of the transaction, which is not an unusual practice in Canadian banking circles.
If the commission had ruled this practice was a problem, it could have presented a challenge for Canada's banks.
The regulators left the way clear for Sears Holding to submit a new takeover bid that reveals the terms and conditions of the support agreements. But those shares must be excluded from the final tally, the commission said, a measure that could tip the balance in favour of the hedge funds.
The banks owned 7.9 million Sears Canada shares between them, while the hedge funds at one time had an interest in 14 million shares altogether.
The Royal Bank declined to comment on the ruling, saying it was still reviewing the details.

 

[tudararms]

I'm curious, how is it that on Chicago's mag mile alone there is a Saks, a Macey's (former Marshall Field's), a Nordstrum, a Neiman Marcus, and a Bloomingdales while in all of downtown Toronto there is only Holts, the Bay and Sears, all of which are struggling? Any thoughts??

 

[alklay]

That's interesting although I think Holt's is doing fine.

It may be that Chicago simply gets more tourists, which may keep the stores alive. I think Holt's really benefits from the out of towners but I can't see, say Sears benefiting because...well, its just a Sears, not unlike the one the out of towner has at the local mall.

Americans tend to have more disposable income, tend to spend more and tend to run higher debts (and thus there is a lot more money floating around).

 

[tudararms]

"It may be that Chicago simply gets more tourists, which may keep the stores alive. I think Holt's really benefits from the out of towners but I can't see, say Sears benefiting because...well, its just a Sears, not unlike the one the out of towner has at the local mall.

True, I agree that tourism must play a certain part, but I've seen all of those department stores in downtown Minneapolis too (along with the Mall of America on the fringe) which is a fairly small city with little tourism. Surely Toronto/GTA is an enormous market, is it just being done wrong here? I would have thought that a few large, international brand department stores would have been good anchors around the Yonge/Dundas area...and you're right, Sear's just doesn't cut it.

 

[samsonyuen]

Besides the tourists, and larger population, Toronto also has less of a department store culture than Chicago. Simpson's, Sears, Eatons, the Bay, and Holt's were the only department stores in the last fifty years in Toronto. Compare it to Montreal, where there are five department stores (La Baie, Les Ailes, Holt's, Simons, Ogilvy), and Sears in the suburbs (where it belongs!).