The Bay says will pay $16 US per Saks share and assume all the latter's outstanding debt as part of the deal. Saks shares closed Friday at $15.31 on the Nasdaq stock market.
"While we serve different markets, we have a lot in common," HBC's chief executive Richard Baker said on a conference call to discuss the deal.
HBC has been kicking the tires on its U.S. rival for the past few months, but the Canadian company isn't the only one interested. A report in the New York Post suggested HBC could face competition from at least one other potential buyer for Saks.
The U.S. retailer operates 42 stores, including its flagship Saks Fifth Avenue in New York. HBC has 48 Lord & Taylor department stores in the U.S. northeast. In Canada, it has 90 Bay department stores and 69 Home Outfitters housewares stores.
In the call, Baker suggested the company hopes to open as many as seven full-line Saks stores and 25 Saks Off Fifth locations in Canada. The latter is the name for Saks' discount outlet stores.
Some of those new stores could come in the form of rebranding and relaunching existing Bay stores, the company said.