Hudson's Bay Co. announced a deal Wednesday to sell its Lord and Taylor banner to Le Tote, a clothing subscription and rental business.
Under the deal, HBC will receive $99.5 million in cash when the deal closes and a secured promissory note for $33.2 million payable in cash after two years.
HBC will also receive an equity stake in Le Tote, two seats on the company's board of directors and certain rights as a minority shareholder.
"Following an extensive review of strategic alternatives, Le Tote's leadership and innovative approach is the best path forward for Lord and Taylor, its loyal customers and dedicated associates," HBC chief executive Helena Foulkes said in a statement.
"For HBC, this transaction builds upon our previous bold actions, further enabling us to focus on our greatest opportunities, Saks Fifth Avenue and Hudson's Bay."
Le Tote will acquire the Lord and Taylor brand and related intellectual property and assume operations of 38 stores, its digital channels and the associated inventory.
The companies said Le Tote expects to extend employment offers to the vast majority of Lord and Taylor's associates.
"We're excited to bring Le Tote together with Lord + Taylor, a storied brand that has stood for quality, style and service for nearly two centuries," said Rakesh Tondon, Le Tote's chief executive and founder.
"With this acquisition, we continue our journey in creating the future of retail."
HBC and HBS Global Properties, HBC's real estate joint venture, will retain ownership of all owned and ground-leased real estate assets related to Lord and Taylor.
However, for at least the initial three years, HBC has agreed to maintain responsibility for the rent owed by Lord and Taylor at the locations operated by Le Tote. HBC expects to be liable for approximately $77 million in Lord and Taylor total cash rent on an annual basis.
The deal to sell the banner comes as a group led by HBC chairman Richard Baker looks to buy the entire company and take it private.
The Baker group has offered $9.45 per share for HBC, however an initial analysis by the company has suggested the offer is "inadequate."
The privatization deal also faces opposition from Catalyst Capital Group Inc., which recently acquired a roughly 10 per cent stake in HBC.
Canada's oldest retailer has struggled in recent years with disappointing results and a battle with activist investor Land and Buildings Investment Management LLC.
HBC launched a strategic review of its alternatives for Lord and Taylor earlier this year as it worked to improve it simplify its organization and strengthen its retail operations.
In February, HBC announced that its Canadian retail banner, Home Outfitters, would be discontinued and its 37 locations will be closed this year. The retailer also about 20 Saks Off Fifth locations will be closed in the United States.