336-Year-Old Hudson's Bay Co. Agrees to Buyout by U.S. Investor
By Doug Struck
Washington Post Foreign Service
TORONTO, Jan. 27 -- The Hudson's Bay Co., which once owned nearly one-third of North America and helped build Canada by feeding a 17th-century beaver-pelt craze, is being sold to a South Carolina billionaire.
The board of directors of HBC ended the search for a buyer for Canada's largest chain of department stores by agreeing Thursday to accept a $980 million offer from Jerry Zucker, a Charleston financier and HBC minority shareholder.
Zucker, 55, whose holdings include chemical and textile companies and the South Carolina Stingrays hockey team, has promised to continue operating the unprofitable Bay stores and plans to reinvigorate them. But the purchase by an American of a company so long entwined with Canadian history is a blow to that nation's pride.
"I'm very upset about it. This is a Canadian store. It is the first Canadian company, and now the Americans are buying it," said Themi Kartakis, 54, as she browsed in the home-appliances section of the Bay store in downtown Toronto on Friday.
The store was festooned with yellow clearance-sale signs to move the winter stock, and shoppers who came in from the grip of Toronto's cold talked of their sentimental attachment to the Bay stores.
"It's so traditional Canada. It always felt like home here," said Stella Proestus, 57, a Canadian who now lives in Greece but makes a point to stop at the Bay when she returns. "It's our youth. Our memories. It's the gifts that you gave that were wrapped with paper that said 'The Bay.' "
The company's memories go back 336 years, when it secured a charter from the king of England to give fur traders in French Quebec some competition in the New World.
A group of gentlemen-adventurers set up a series of summer trading posts to collect furs from trappers and Indians. They gave the natives colored beads and silk ribbons, then knives, axes and sturdy blankets. The blankets are still sold at the Bay. In return, the company was able to load its ships with beaver pelts, which were then manufactured into a shiny felt cloth used to make hats that became a rage in Europe.
As creeks were "beavered out," trappers and the trading posts moved farther into the wilderness, exploring and claiming the land. Hudson's Bay Co. eventually laid claim to 3 million square miles. Three of its trading posts became provincial capitals -- Winnipeg, Edmonton and Victoria -- and the outposts served as a check against encroachment by Americans from the south.
"They helped keep out the infernal Americans for a long time," said Ian Radforth, a professor of history at the University of Toronto. "When some American fur traders started moving into what we call the northwest, Hudson's Bay was there to say, 'This is our monopoly.' "
In 1870, under pressure from the crown, the company reluctantly transferred most of its land to the new dominion of Canada. Slowly, the company shed its remote connections -- it sold its stores in the far north of Canada in 1987 to a chain called the Northern -- and concentrated on urban retailing. HBC is Canada's premier chain. In addition to the 98 Bay stores, the company owns 294 Zellers discount retailers, 56 outlets of Home Outfitters -- a kitchen, bed and bath box-store chain -- and 118 small general-merchandise stores called Fields. The company has 70,000 employees.
HBC was better at fur trading than retailing. The company's fortunes have declined slowly since 1981, owing to growing competition from U.S. retailers. The company lost $38 million in the third quarter of 2005. Zucker, who already owns a 19 percent interest in HBC, had publicly complained that the management of the company was lackluster and unresponsive. He offered to buy the whole company in October. The board refused, but when no other buyers were interested, they asked for and accepted a slightly sweeter offer this week.
"Hudson's Bay Company is a great Canadian icon," Thomas d'Aquino, president of the Canadian Council of Chief Executives, said from Davos, Switzerland, where he is attending the World Economic Forum. "It is arguably the Western world's oldest company."
He said it is "sad" that the company could not continue with Canadian ownership but noted that foreign ownership in Canadian firms may increase as a byproduct of free trade and open investment policies.
Canadians periodically wring their hands over the sale of their institutions to the Americans. The country's gold-standard hockey icon, the Montreal Canadiens, is owned by a Colorado investor, George Gillett Jr. Molson, the Canadian everyman's beer, merged with Coors. Tim Hortons, a ubiquitous sandwich-and-doughnut chain close to Canadian hearts, is owned by Wendy's, but the American fast-food giant said it would soon spin off its Hortons holdings and list the offering on the Toronto Stock Exchange.
But that fear "is largely misplaced in a globalized world," said Karl Moore, a management professor at McGill University in Montreal. "If someone thinks it's more valuable and they happen to live in the United States, that's life."
In fact, Canadians proportionately own more assets in the United States than the reverse, he said. In 2004, U.S. investors put about $217 billion into Canada, while investors in Canada, with a little more than one-tenth the population, put about $134 billion into their southern neighbor, he said.
Canadian companies own Learjet Inc. parent Bombardier Inc., Brooks pharmacies, Circle K stores and Aldo shoes, among other brands operating in the United States, Moore noted.
There was less public angst this week than there was when the Bay company was briefly courted by Target Corp. in August 2004. As the company continued to lose money, its fate became inevitable.
"I suspect there will be a bit of weeping and wailing, but not too much," said Richard Talbot, president of Talbot Consultants International Inc., a Toronto-based retailing expert. "It's really just nostalgia. At the end of the day, the Canadian consumer is looking for the best product at the best price. They don't care who owns it."