HBC, a Canadian retail business group, has entered into definitive agreements to sell the company’s remaining stake in its German real estate joint venture, and divest its related retail joint venture to its partner, SIGNA, along with assumption of certain obligations for a total consideration of $1.5 billion (€1 billion).

A portion of the transaction’s net proceeds will be used to fortify HBC’s balance sheet by fully repaying its outstanding $436 million term loan. Upon close, HBC will completely exit its German operations.

Helena Foulkes, CEO of HBC said, “This agreement is an exciting milestone for HBC as it will deliver important financial and strategic benefits. Financially, it provides us with the best opportunity to capitalize on our German real estate and allows us to further strengthen our balance sheet. Strategically, we will be able to fully focus our resources on HBC’s North American operations, including our best growth opportunities – Saks Fifth Avenue and Hudson’s Bay. This transaction is another bold action that unlocks the value of our real estate and demonstrates our resolve to creating a stronger, more capable HBC.”

As part of the overall transaction, HBC will assume ownership of the Netherlands retail business, and release SIGNA from its 50.01% back-to-back guarantee of certain obligations of Hudson’s BayNetherlands. SIGNA will assume German liabilities from HBC. HBC has retained a financial advisor to review options for the Netherlands business, which has not performed to expectations. As HBC pursues options, the company expects to undertake cost savings initiatives including, among others, certain store closures.

The transaction is expected to close in fall 2019, subject to applicable regulatory approvals and other customary closing conditions. At signing, SIGNA delivered a deposit of $150 million (€100 million). J.P. Morgan Securities LLC acted as exclusive financial advisor to HBC on the transaction.

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