Three corporate mergers totaling nearly $13 billion were announced Monday in the luxury retail, pharmaceutical and lens supply industries, coming just one day after a big proposed merger in the advertising industry.
On Monday, Saks Inc. agreed to sell itself to Hudson’s Bay Co., the Canadian parent of upscale retailer Lord & Taylor, for about $2.4 billion. U.S. drugmaker Perrigo agreed to buy Ireland’s Elan for $8.6 billion. PPG Industries Inc. will sell its majority stake in lens supplier Transitions Optical to Essilor International for about $1.73 billion.
Those deals follow Omnicom Group Inc. and Publicis Groupe SA proposed combination in a “merger of equals” that will create the world’s largest advertising firm, one worth more than $35 billion called Publicis Omnicom Group.
The acquisition of Saks Inc. by Hudson’s Bay Co. combines three department-store brands — Hudson’s Bay, Lord & Taylor and Saks Fifth Avenue— and creates a North American upscale retailing behemoth with 320 stores in some of the biggest and most populous cities in the U.S. and Canada.
Lord & Taylor and Hudson’s Bay, Canada’s biggest department store chain, both cater to well-heeled shoppers who can afford $98 Free People blouses and $250 Coach handbags. Saks customers, on the other hand, are more affluent and can shell out $800 for Christian Louboutin heels or a couple of thousand dollars for Gucci handbags.
During a conference call with investors on Monday, Hudson’s Bay Co. Chairman and CEO Richard Baker said the goal is to bring Saks luxury brand into Canada. The company plans to open seven Saks Fifth Avenue stores and 25 Off Fifth outlet stores to Canada, while creating a Saks website targeted to Canadians. Hudson’s Bay is making a play for luxury at a time when shoppers still appear to be willing to shell out money for posh handbags and clothing despite global economic challenges.
U.S. drugmaker Perrigo’s acquisition of Ireland’s Elan should allow the rapidly growing company to reduce its tax bill and boost its royalty stream.
After spending four months defeating a series of hostile, lower-priced takeover bids by Royal Pharma, Elan earlier in July said it was open to better offers. Several potential U.S. suitors sought to acquire Elan’s flow of royalties from drugs it helped develop, particularly the multiple sclerosis fighter Tysabri.
Perrigo, which has been headquartered in the small western Michigan town of Allegan since 1887, said it would move its tax residence to Ireland and hopes to cut its tax liabilities nearly in half as it grows non-U.S. sales.
Perrigo is already the largest maker of generic drugs for major retail chains in the United States, including Walgreens and Wal-Mart.
In addition to Transitions Optical, French company Essilor will acquire PPG’s optical sun lens business. PPG will continue to supply optical dyes and research and development services.
PPG Industries makes paints and coatings for autos, aircraft and other industries. The Pittsburgh company said it owns a 51 percent stake in Transitions Optical, while Essilor holds a 49 percent share. PPG plans to use proceeds from the deal on acquisitions and share repurchases, which it will resume doing after suspending buybacks earlier this year.
Transitions Optical supplies photochromic lenses and had about $800 million in revenue last year. Essilor designs and makes a range of lenses to improve and protect eyesight.
The combination of the two advertising companies is designed to bolster their focus on growing Asian and Latin American markets such as China and Brazil, where they each have ramped up operations to counter lackluster growth in weak European markets.
Although a combined firm will allow for more pricing power in general, the decrease in competition could present regulatory hurdles in the U.S. and Europe. Client conflicts also could be an issue, as rivals such as Coca-Cola Co., PepsiCo, McDonald’s, Yum Brands’ Taco Bell, Johnson & Johnson and Procter & Gamble now find themselves under the same umbrella.
Rich Tullo, an analyst at Albert Fried & Co. in New York, predicted pushback from regulators in both the U.S. and France.