Hudson’s Bay Company and Le Tote, a leading fashion rental subscription service, have entered into an agreement for Le Tote to acquire Lord + Taylor.

WHO: Founded in 2012 by Brett Northart and Rakesh Tondon, Le Tote is a fashion subscription service that lets women rent clothing and accessories for a flat monthly fee. Members choose the items they want to wear and can keep them as long as they like. Members also have the option to purchase items at a discount. Le Tote’s data-driven model is powered by proprietary algorithms and in-house operational solutions. Le Tote partners with hundreds of brands including French Connection, Vince Camuto, BCBGeneration, Kate Spade, Rebecca Minkoff, Calvin Klein, and more. The Y Combinator-backed company has raised venture funding from Andreessen Horowitz, Google Ventures, Azure Capital Partners, Lerer Hippeau Ventures, Simon Venture Group, Sway Ventures, Epic Ventures, Arsenal Venture Partners, Funders Club, and others.

Hudson’s Bay Company is a diversified retailer focused on driving the performance of high-quality stores and their omni-channel platforms and unlocking the value of real estate holdings. Founded in 1670, HBC is the oldest company in North America. HBC’s portfolio today includes formats ranging from luxury to premium department stores to off-price fashion shopping destinations, with more than 300 stores and about 40,000 employees around the world. HBC’s leading businesses across North America include Saks Fifth Avenue, Hudson’s Bay, Lord + Taylor, and Saks OFF 5TH.

WHY: Le Tote’s proprietary technology, data, and innovation combined with Lord + Taylor’s traditional store footprint, e-commerce presence, and merchandise selection will offer customers a new experience in the mid-market segment.

IN THEIR OWN WORDS: Helena Foulkes, HBC’s CEO, said, “We’re excited to have reached an agreement with Le Tote that creates a new model for Lord + Taylor, bringing together fashion rental subscriptions with traditional retail. Following an extensive review of strategic alternatives, Le Tote’s leadership and innovative approach is the best path forward for Lord + Taylor, its loyal customers and dedicated associates. For HBC, this transaction builds upon our previous bold actions, further enabling us to focus on our greatest opportunities, Saks Fifth Avenue and Hudson’s Bay.”

Rakesh Tondon, Le Tote’s CEO and founder, said, “Since founding Le Tote, it’s been our mission to push the boundaries of retail. We’ve strived to lead the charge in developing innovative, intuitive, value-driven ways for customers to engage and consume. We’re excited to bring Le Tote together with Lord + Taylor, a storied brand that has stood for quality, style and service for nearly two centuries. With this acquisition, we continue our journey in creating the future of retail.”

DETAILS:

• Hudson’s Bay Company and Le Tote have entered into an agreement for Le Tote to acquire Lord + Taylor.
• Under the terms of the agreement, Le Tote will acquire the Lord + Taylor brand and related intellectual property while assuming operations of 38 stores, Lord + Taylor’s digital channels, and the associated inventory.
• Le Tote expects to extend employment offers to the vast majority of Lord + Taylor’s associates.
• HBC will receive $99.5 million (USD$75 million) in cash upon the transaction’s closing and a secured promissory note for $33.2 million (USD$25 million) payable in cash after two years.
• HBC will receive an equity stake in Le Tote, two seats on the company’s Board of Directors, and certain rights as a minority shareholder.
• HBC and HBS Global Properties, HBC’s real estate joint venture, will retain ownership of all owned and ground-leased real estate assets related to Lord + Taylor. For at least the initial three years, HBC has agreed to maintain economic responsibility for the rent payments owed by Lord + Taylor at the locations operated by Le Tote. Net of HBC’s distributions from HBS Global Properties, HBC expects to continue to be liable for approximately $77 million in Lord + Taylor total cash rent on an annual basis.
• In fiscal 2018, Lord + Taylor represented $1.4 billion of HBC’s $9.4 billion in retail sales. HBC’s 2018 adjusted EBITDA was $462 million, which reflects a $119 million loss attributable to Lord + Taylor, inclusive of allocated corporate expenses.
• Starting in 2021, HBC and Le Tote will have options to reassess the Lord + Taylor store network. This may include HBC recapturing select locations to determine their highest and best use, including possible redevelopment into mixed-use properties with a variety of services, experiences, and retail offerings.
• PJ Solomon acted as financial advisor to HBC for this transaction and throughout the review of strategic alternatives for Lord + Taylor, and Willkie Farr & Gallagher LLP acted as legal advisor to HBC.
• Le Tote was advised by Citi, as its financial advisor, and Kirkland & Ellis LLP, as its legal advisor, in connection with the transaction.