Macy's $10 billion market cap makes it a big bite.

By Phil Wahba
February 3, 2017

Hudson’s Bay Co hbc has made an overture to Macy’s m for a potential takeover of the struggling department store, the Wall Street Journal reported on Friday, citing people familiar with the matter.

Both Macy’s and HBC declined to comment. Macy’s shares shot up 9% on the news.

HBC, which owns U.S. department stores Saks Fifth Avenue and Lord & Taylor, as well as chains in Canada, Germany and the Netherlands, has been on a buying spree in recent years, snapping up iconic but struggling retailers with highly valuable flagship stores in cities like New York, Toronto and Frankfurt, raising the money to do so buy selling off some of those best stores and leasing back the space.

Macy’s, which has been grappling with declining sales for two years now and is closing 63 stores this year and reducing staff by 10,000 people, owns such iconic stores as its Herald Square flagship in Manhattan and the Macy’s in San Francisco’s Union Square.

The retailer has been under pressure from activist investors displeased with its stock performance to sell of its stores into a real estate investment trust or look at ways of wringing out money from its physical assets. The approach by HBC was predicted by Fortune in late 2015.

Macy’s, which also owns the upscale Bloomingdale’s chain, has a market value of $10 billion, which would make it a big bite for HBC, whose market value is just under $2 billion. But HBC could issue stock or raise debt using its best real estate, which includes locations like the Saks Fifth Avenue flagship in Manhattan or the Hudson’s Bay store in downtown Toronto, as collateral.

The WSJ said that talks between the companies are at a preliminary stage and are not limited to an outright acquisition. The paper also said there was no certainty anything would come of these talks.

Macy’s has been buffeted by changing shopper habits in recent years as consumers increasingly turn to retailers like Amazon.com and T.J. Maxx to buy clothes. What’s more, many of its stores are in weak malls, compounding a drop in shopper traffic.

Long time CEO Terry Lundgren, who orchestrated a 2005 mega-deal that turned a collection of regional department store chains into Macy’s Inc, is set to step down in the coming weeks, handing over the company to President Jeff Gennette, who’s been with the company since the early 1980’s.

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