Hudson's Bay Company (HBC) as entered into a definitive agreement to acquire Gilt Groupe Holdings for $250 million in cash, subject to customary requirements.
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Gilt is a online shopping destination, offering its members special access to inspiring fashion merchandise and experiences. With over 9 million members and approximately 50% of orders generated on its mobile platform, Gilt has cultivated a loyal and devoted millennial following.
The transaction is expected to contribute approximately $500 million to HBC’s consolidated fiscal 2016 sales and be complementary to HBC’s existing business.
Additionally, HBC plans to leverage Gilt’s mobile and personalization capabilities to accelerate the growth of HBC’s digital business across all of its existing banners.
The Company also expects to benefit from the integration of Gilt with Saks OFF 5TH locations, including the introduction of a new return program at Saks OFF 5TH locations for Gilt merchandise following the closing of the acquisition.
HBC also expects to create Gilt concept shops at Saks OFF 5TH stores, developing a true all-channel model for Gilt.
The Company expects Gilt to contribute approximately $40 million of Adjusted EBITDA by fiscal 2017, which is expected to be generated from both revenue and cost drivers.
Opportunities for revenue growth at Gilt include growth in Gilt’s underlying business, revenue synergies from accepting Gilt returns at Saks Off 5th stores, and growth in Gilt’s membership from leveraging HBC’s customer base to source new members.
Opportunities for revenue growth at Saks Off 5th include increased customer traffic to stores from Gilt customers making returns and sales to customers visiting Gilt concept shops inside Saks Off 5th locations.
Opportunities for expense savings and operational efficiencies from combining the businesses include reduced shipping costs, increased purchasing power, and shared inventories across Gilt and Saks Off 5th. ■