Hudson's Bay Company to Acquire Saks Incorporated for US$16 per Share, Bringing Together Three Iconic Retail Brands

Hudson's Bay Company

(“HBC” or the “Company”) and Saks Incorporated

(“Saks”) announced today that they have entered into a definitive merger agreement whereby HBC will acquire Saks for US$16.00 per share in an all-cash transaction valued at approximately US$2.9 billion, including debt. The transaction has been approved by each company's board of directors and is expected to close before the end of the calendar year, subject to approval by Saks shareholders, regulatory approvals and other customary closing conditions. This transaction will bring together three of the retail industry's most iconic brands – Hudson's Bay, Lord & Taylor and Saks Fifth Avenue – to create a leading North American retailer addressing a broad consumer spectrum across the luxury, mid-tier and outlet retail sectors. HBC will continue to build upon Saks' market-leading position and identity as a luxury retailer. The combined company will operate 320 stores, including 179 full-line department stores, 72 outlet stores and 69 home stores in prime retail locations throughout the U.S. and Canada, along with three e-commerce sites. The combined company would have generated pro forma sales and normalized EBITDA in fiscal 2012 of approximately C$7.2 billion and C$587 million, respectively, before any synergies. HBC expects to achieve C$100 million of annual synergies within three years. “This exciting portfolio of three iconic brands creates one of North America's premier fashion retailers,” stated Richard Baker, HBC's Chairman and CEO. “I've had a long connection with Saks over the years, and am thrilled to bring one of the world's most recognized luxury retailers into the HBC family. With the addition of Saks, HBC will offer consumers an unprecedented range of retailing categories and shopping experiences. This acquisition will increase our growth potential both in the U.S. and Canada, generate significant efficiencies of scale, add to our powerful real estate portfolio and deliver substantial value to our shareholders.” Steve Sadove, Chairman and CEO of Saks, commented, “We believe this transaction delivers compelling value to our shareholders and that Saks Fifth Avenue is an excellent fit within the HBC organization. We also believe that HBC recognizes the tremendous value of our people, our real estate, our customer and vendor relationships, and most importantly the power and potential of our iconic brand. The $16 per share price represents an approximate 30% premium to the May 20, 2013 closing price, the day before media speculation began. We have made significant progress over the past few years to position Saks for future growth and to evolve into an omni-channel retailer. 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.” Driving Significant Growth and Creating Efficiencies of Scale The acquisition of Saks will drive significant revenue growth opportunities for HBC. This includes the introduction of Saks into Canada through full-line, outlet and online formats, building upon Canada's position as saks.com's largest international ship-to market. The combination will maximize existing e-commerce platforms across all three banners to enhance customers' shopping experience. HBC also plans to continue OFF 5TH's expansion throughout the U.S. The transaction further advances HBC's previously articulated strategy for enhanced growth. HBC will continue to execute its investment plan across all three banners to upgrade the customer experience and deliver greater productivity in its stores and omni-channel platforms. HBC expects to realize C$100 million in annual synergies within three years through a combination of operational efficiencies, implementing best practices across banners and back-office consolidation. HBC will leverage top talent across both organizations and optimize a multi-banner shared services organization to drive additional benefits and reduce expenses. HBC is committed to preserving and building upon the iconic position of the Saks Fifth Avenue brand. Saks will operate separately under the HBC umbrella, including its own merchandising, marketing and store operations teams, and will remain headquartered in New York City. It is also expected that Saks will continue to be led by key members of its existing management team. World-Class Retail Real Estate Portfolio The combination of Saks and HBC's real estate creates an unmatched coast-to-coast North American retail portfolio serving three strong banners. This real estate is highlighted by a number of marquee owned properties including Saks Fifth Avenue locations on Fifth Avenue in New York City and Wilshire Boulevard in Beverly Hills; Lord & Taylor's Fifth Avenue flagship; and Hudson's Bay properties in downtown Toronto, Vancouver and Montreal, among others. HBC will evaluate strategic alternatives to fully realize the substantial value from the combined property portfolio including but not limited to the creation of a real estate investment trust. Financing of the Transaction HBC intends to finance the transaction, and refinance certain existing indebtedness at HBC, with a combination of approximately US$1.0 billion of new equity, US$1.9 billion of senior secured loans, US$400 million of senior unsecured notes and available cash on hand. An entity affiliated with Ontario Teachers' Pension Plan (“Teachers'”) and funds advised by West Face Capital Inc. (“West Face”) have separately committed to provide HBC with US$500 million and US$250 million of equity funding, respectively, to support this transaction. BofA Merrill Lynch and Royal Bank of Canada have provided HBC with fully committed credit facilities, which together with the equity commitment provided by Teachers', is sufficient to close the transaction. The Company has received conditional listing approval from the Toronto Stock Exchange for the common shares of the Company to be issued to Teachers' and West Face. In consideration for Teachers' commitment, concurrently with the execution of the merger agreement, HBC has issued 1.5 million share purchase warrants to Teachers', and will issue an additional 3.5 million share purchase warrants to Teachers' upon the closing of the transaction. In consideration for the West Face commitment, HBC will issue 1.75 million share purchase warrants to West Face upon the closing of the transaction. The subscription price of the common shares and the exercise price of the warrants will be C$17 per share (subject to adjustment in certain limited circumstances), which represents a premium to the trading price of HBC's shares immediately prior to the announcement of the transaction. Dividend Policy HBC intends to continue paying a quarterly dividend of C$0.09375 per share through closing of the transaction; after closing, HBC expects to reduce its quarterly dividend to C$0.05 per share to accelerate deleveraging in the short term. Go-Shop Period There is a 40-day “go-shop” period under the terms of the agreement, during which Saks may solicit alternative proposals from third parties. Saks does not anticipate that it will disclose any developments with regard to this process unless and until Saks' board of directors makes a decision with respect to a potential superior proposal. There can be no assurance that this process will result in a superior proposal. The agreement also includes customary breakup fees payable to HBC in connection with the termination of the agreement in certain circumstances. Advisors BofA Merrill Lynch acted as lead financial advisor to HBC. RBC Capital Markets acted as an additional financial advisor on the transaction. Stikeman Elliott LLP and Willkie Farr & Gallagher LLP acted as legal counsel to HBC. Goldman Sachs, Morgan Stanley and Guggenheim Securities acted as financial advisors and Wachtell, Lipton, Rosen & Katz acted as legal counsel to Saks. Conference Call to Discuss Transaction Richard Baker, HBC's Chairman and Chief Executive Officer, Michael Culhane, HBC's Chief Financial Officer, and Don Watros, HBC's Chief Operating Officer, will discuss the transaction during a conference call on Monday, July 29, 2013 at 8:30 am EDT. The conference call will be accessible by calling the participant operator assisted toll-free dial-in number (877) 852-2926 or international dial-in number (253) 237-1123. A live webcast of the conference call will be accessible on HBC's website at http://investor.hbc.com/events.cfm. An audio instant replay will be available via this link until August 29, 2013. About Hudson's Bay Company Hudson's Bay Company, founded in 1670, is North America's longest continually operated company. The company was purchased in 2008 by NRDC Equity Partners' Robert Baker, Bill Mack, Lee Neibart and Richard Baker, who had previously purchased Lord & Taylor in 2006. In Canada, HBC operates Hudson's Bay, Canada's largest department store with 90 locations, unsurpassed in its fashion, beauty, home and accessory designers and brands, as well as thebay.com. HBC also operates Home Outfitters, Canada's largest home specialty superstore with 69 locations across the country. In the United States, HBC operates Lord & Taylor, a department store with 48 full-line store locations throughout the northeastern United States and in two major cities in the Midwest, and lordandtaylor.com. With approximately 29,000 Associates in Canada and the U.S., Hudson's Bay Company banners provide stylish, quality merchandise at great value, with a dedicated focus on service excellence. Hudson's Bay Company trades on the Toronto Stock Exchange under the symbol "HBC".