The possibility of this happening makes me very very sad and upset:

(Reproduced out of the Globe and Mail... probably very illegally).

U.S. giant seeks to buy the Bay Target Corp. sees Canada's oldest company as prime acquisition in fight with Wal-Mart

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MARINA STRAUSS, ANDREW WILLIS AND ERIC REGULY U.S.-based Target Corp. is in advanced talks to buy part or all of Hudson's Bay Co., the 334-year-old Canadian institution that owns The Bay and Zellers department stores, sources say.

The sale of HBC would leave Canada's oldest company in foreign hands, relegating to the history books a firm that opened up the country after receiving a monopoly to trade on all the rivers flowing into Hudson Bay, dating back to 1670.

But a legacy thick with furs and wool blankets hasn't stopped HBC from struggling to keep shoppers coming through the doors as behemoth Wal-Mart Stores Inc. and other strong foreign rivals stole away business.

HBC has been the only domestically owned department store retailer since the 133-year-old Eatons chain failed in 1999, a victim of shifting tastes as even its long-time customers shopped elsewhere.

Meanwhile, Target, a 1,107-store discount department-store chain with a stylish bent, is locked in a bitter battle with Wal-Mart for the hearts and wallets of U.S. bargain shoppers.

The billion-dollar purchase of HBC would mark the opening of a northern front and its first international expansion.

Sources said a deal may come within the next two weeks, but also cautioned that talks could break off at any time.

The deal makes strategic sense because Target has a discount format similar to HBC's Zellers, and they both sell a number of the same private labels such as Mossimo and Cherokee, analysts said.

One scenario has Target in talks with wealthy industrialist Jerry Zucker of South Carolina, HBC's largest shareholder, to buy his 18.1-per-cent stake as a prelude to taking it over.

Target would convert about half of Zellers' 300-plus stores into Target outlets, and even turn some Bay locations into Target stores, sources said.

"There are too many things going on right now to not think something is happening," one source said.

HBC spokeswoman Hillary Stauth would not comment about talks with Target. "This is an ongoing rumour in the market. We aren't prepared to comment on rumours." Target officials were asked yesterday on an analysts' conference call about the company's interest in international acquisitions.

"Sure, we all believe at some point . . . five years, 10 years or who knows when, Target will be international as a retailer, but we will do that only when we find the appropriate vehicle for accomplishing that," an unnamed official is quoted as saying in the call's preliminary transcript.

"Meanwhile, we have tremendous growth prospects right here in the United States for . . . a very long time to come." Robert Johnston, a vice-president with Mr. Zucker's firm, said he wasn't aware of any talks.

Still, some HBC insiders say that the buzz about Target picking up anywhere between 60 and 175 of Zellers' largest and best stores has reached a fevered pitch over the past week or so.

Some have heard that Target would buy the most attractive Zellers stores and leave the others to HBC to run in smaller markets that don't compete head-on with Wal-Mart. HBC would then continue to operate the 99 Bay stores and 45 Home Outfitters big-box outlets.

"Everyone feels something is going to happen this month," said retail consultant Anthony Stokan, who has spoken with HBC suppliers.

"The rumours are endless." Canadian Tire Corp. Ltd. has even made inquiries with landlords about the possibility of picking up some Zellers properties if Target doesn't want to keep them all, sources said.

But Canadian Tire spokesman Scott Bonikowsky said the firm's real estate officials make such inquiries "in the normal course of business.

. . . They probably placed a call saying, 'If they ever do become available, give us a call.' " Target executives have said in recent months that they want to bolster the business, with plans to build larger big-box stores that sell groceries alongside clothes and stereos, apart from other new outlets. The Minneapolis-based company recently sold a 62-department- store chain for $3.24-billion (U.S.) to focus on discount shoppers.

"You can see why Target would be interested," said one investment banker, who works with retail companies and has heard repeated rumours of Target's recent interest in HBC. "They have sold off their department stores in the States to focus on the discount segment, taking on Wal-Mart. It makes sense to bring that strategy to Canada, where Zellers plays the Target role as the main rival to Wal-Mart." Target is expected to offer between $16 and $16.50 (Canadian) a share for HBC if it bids for the entire firm, according to one investment banking source familiar with the talks, which would value the Canadian retailer at up to $1.14-billion.

HBC SNAPSHOT: Headquarters: Toronto Established: 1670 Bay stores: 90 Zellers stores: More than 300 Home Outfitters stores: 45 Employees: 70,000 (full-time, part-time, contract, subsidiaries, affiliates) Other holdings: Hudson's Bay Company Archives, Archives of Manitoba - includes the largest holding of fur trade maps in North America, as well as prints, drawings, paintings, posters, calendars, and advertising dating from 1738 Revenue: $7.4-billion (in 2004)