Hudson's Bay (TSX: HBC) has failed to secure equity financing in the month since announcing its takeover interest in Macy's (NYSE: M), according to a Reuters report. Although the Canadian retailer has enjoyed some success with previous retail acquisitions since going public in 2012, boxing up Lord & Taylor that same year and Saks Fifth Avenue for $2.9 billion in 2013, institutional backers including existing HBC partner Simon Property (NYSE: SPG) have reportedly remained reluctant to finance a deal that would increase their exposure to the contracting brick-and-mortar retail sector. Macy's is said to be skeptical the necessary backing can be required.
However, HBC executive chairman Richard Baker has made a career out of finding the value in the real estate behind retail holdings. In 2014, for example, the Saks flagship store in Manhattan alone was appraised for $3.7 billion, a premium of roughly 27.5% to what HBC paid for the company itself. Yet Macy's may be reluctant to exploit its real estate assets, calling into question the fit for any potential deal.
HBC's shares closed Friday down more than 3% and Macy's shares tumbled over 4%, ending the week with a $9.8 billion market cap.