Macy's Shares Surge 10% on Report it's in Deal Talks with Hudson's Bay

By Christina Cheddar Berk, CNBC

Macy's shares surged more than 10 percent Friday as takeover rumors continued to swirl around the company.

The largest U.S. department store chain has been approached by Canada's Hudson's Bay, the owner of Saks and Lord & Taylor, The Wall Street Journal reported, citing people familiar with the matter.

These people said the talks are at an early stage, and may not lead to a deal. One of the people told the paper that the two retailers are also discussing other ways to cooperate with each other, including a potential real estate deal.

Macy's has been dogged by disappointing sales in recent quarters and in January it announced 68 of the 100 locations it plans to close as it looks to turn around its performance.

The company's longtime chairman and CEO, Terry Lundgren, is also about to depart the company, handing the reins to Macy's President Jeff Gennette later in the quarter.

Hudson's Bay has been eager to expand its footprint in the U.S.However, Macy's would be a challenge for Hudson's Bay to absorb. Ahead of this latest rumor, Macy's market capitalization was nearly $10 billion, while Hudson's Bay was about $1.7 billion. Macy's also has a lot of debt — about $7.5 billion, according to the Journal report.

Department store sales suffered in the latest holiday season as shoppers increased the number of items they bought online.

Takeover rumors were sparked Thursday by a report in the New York Post, which said Macy's was seeking a buyer.

That report, which also cited unnamed sources, said activist investor Jeffrey Smith, of Starboard Value, was putting pressure on the company in the wake of its poor performance. Smith became an investor in July 2015, and Macy's stock has shed nearly 60 percent since that time, the report said.

Buoyed by the rumors, Macy's shares were recently trading at $33.12, up 7.8 percent.

Hudson's Bay told CNBC it does not comment on rumors or speculation.

Courtesy of CNBC