Hudson's Bay Co. reported to be in bid for Macy's

Shares of Hudson's Bay Co. and department store chain Macy's surged on Friday following reports that the venerable Canadian retailer has made a takeover approach to the U.S. company.

Hudson's Bay shares rose as high as $10.62 on the TSX before pulling back to close at $10.39, up 39cents, or almost fourper cent, from Thursday's close.

Share of Macy's were up more than sixper cent, closing at $32.69US on the New York Stock Exchange.

The Wall Street Journal, citing an unnamed source,reported that talks between the companies are at an early stage, adding that a deal for Macy's real estate could be a possibility.

• 'Disrupt or be disrupted': What to expect from 2017's retail landscape
• Retail in reverse: Online-only sellers expand to bricks-and-mortar stores
• Inside the Bay's $60-million bid to take on Amazon

Hudson's Bay could raise equity and debt against its real estate portfolio, which could be worth $14 billion US, the Journal reported, citing a source. HBC could also bring a partner, the Journal reported.

"We do not comment onrumouror speculation," TiffanyBourr,director of corporate communications at Hudson's Bay, said in anemailstatement to CBC News.

Founded in 1670, Hudson's Bay has been on the acquisition trail in recent years, buying up the Saks Fifth Avenue department store chain in North America and the Galeria Kaufhof chain in Germany. In early January 2016, the company announced the purchase of Gilt, a membership-based online retailer that caters to millennial generationshoppers.

Based on market capitalization, Macy's is much bigger thanHudson's Bay, with market caps of roughly $10.6 billion US and $1.88billion Cdn, respectively.

However, Macy's has been struggling lately in the face of competition and shifting consumer behaviour toward internet shopping.

The company announced in early January that it would shut 68 stores by the middle of 2017, and eliminate about 10,000 jobs. The move would leave Macy's with about 660 U.S outlets.

News of the cuts came as the company posted weak holiday sales, saying comparable stores' sales dipped by more than two per cent last quarter.

The Starboard Value hedge fund, which held a one per cent stake in Macy's as of September2016, has pushed the company to spilt its real estate holdings from its retail business. Starboard has said the real estate could be worth $21 billion US. However, the Journal said Macy's has resisted Starboard's urging.