NEW YORK — Saks Inc. announced Monday that it was selling its Northern department store group for $1.1 billion in cash to Bon-Ton Stores Inc., bolstering Bon-Ton as a regional player in the Midwest.
Saks' management will hold on to its Saks Fifth Avenue division -- at least for now -- in an effort to turn the business around.
The deal, expected to be completed in the fiscal first quarter of 2006, will create a 280-plus store chain with total sales of $3.5 billion. York, Pa.-based Bon-Ton will add 142 former Saks department stores under the names of Carson Pirie Scott, Bergner's, Boston Store, Younkers and Herberger's to its store portfolio.
Bon-Ton would also assume approximately $85 million of liabilities, including about $35 million in capitalized leases.
The Northern department store group generated revenue of $2.2 billion last year. That's close to double Bon-Ton's sales of $1.3 billion last year. Bon-Ton operates 139 department stores and two furniture stores in 16 states from the Northeast to the Midwest under the Bon-Ton and Elder-Beerman names.
Shares of both retailers soared. Bon-Ton's stock rose $3.39, or 20%, to $20.05. Saks shares gained $1.49, or 8.9%, to $18.15.
Executives from both retailers said the deal was a good fit, noting the companies have similar-size stores and a similar merchandising formula.
The deal would complete the breakup of Birmingham, Ala.-based Saks Inc., which was created by the 1998 merger of Saks Fifth Avenue with Proffitt's Inc. The merger didn't create big cost savings, as expected, resulting in disappointing earnings.
In April, Saks Inc. announced that it was selling its Proffitt's and McRae's department stores to privately held retailer Belk Inc. for $622 million in cash.
The sales leave Saks Inc. with its Saks Fifth Avenue Enterprise division, which includes Saks Fifth Avenue department stores, Saks Off 5th Stores and Saks.com, as well as Parisian department stores. It is studying strategic alternatives for Club Libby Lu, a 56-unit specialty store chain that caters to preteens.