Hudson's Bay Co has made a takeover approach for struggling retailer Macy's Inc, people familiar with the matter said, trying to push further into the U.S. market where it already owns the Lord & Taylor and Saks Fifth Avenue chains. While the Toronto-based company faces major financing and operating challenges in completing a deal to buy Macy's, which is trying to overhaul its operations, it could use its existing foothold in the U.S. to save on administrative costs and have more negotiating power with its vendors. Shares of Macy's closed up 6.4 percent at $32.69 on Friday. Hudson's Bay rose to 10.39 Canadian dollars.

A man walks past a Macy's department store in Washington, DC. Andrew Caballero-Reynolds | AFP | Getty Images

Talks between the companies are at an early stage, one of the people said. The sources asked not to be identified because the negotiations are confidential. Hudson's Bay said it does not comment on rumors or speculation, while Macy's declined to comment. Macy's, the host of New York's annual Thanksgiving Day parade, is in the midst of a turnaround engineered by Chairman and Chief Executive Officer Terry Lundgren, who assumed leadership of the company in 2004. Lundgren is set to step down this year, and could earn $80.24 million if there is a change of company control, according to a filing. Macy's has also been under pressure from activist hedge fund Starboard Value LP since 2015 to separate its real estate from its retail business to better monetize its real estate assets. Starboard estimated those assets to be worth $21 billion. Starboard held around 1 percent of Macy's stock as of Sept. 30 last year, making it the company's 15th largest shareholder. Starboard founder Jeff Smith did not return calls seeking comment.

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