Macy's shares surged Friday as takeover rumors continued to swirl around the company, but at least one proposed combination would be tough to pull off, sources say.



Earlier, shares of the largest U.S. department store chain jumped more than 10 percent, after The Wall Street Journal reported Macy's had been approached by Canada's Hudson's Bay, the owner of Saks and Lord & Taylor.



People familiar with the matter told CNBC that those discussions did take place but the talks are at an early stage, and may not lead to a deal.

Those people said Macy's management took a meeting with Hudson's Bay, but has not engaged in talks on a deal.

Hudson's Bay has been eager to expand its footprint in the U.S., however, Macy's would be a challenge for Hudson's Bay to absorb. Ahead of this latest rumor, Macy's market capitalization was nearly $10 billion, while Hudson's Bay was about $1.7 billion. Macy's also has a lot of debt — about $7.5 billion, according to the Journal report.

People familiar with the talks said Hudson's Bay might need to bring in a partner to provide equity, but would still need to lever the combined company a great deal to make it happen. One potential scenario could involve Hudson's Bay making the purchase and then splitting into an operating company and a property company with the property company taking on most of the debt.

This complicated structure could make an acquisition very unlikely, sources told CNBC.