Hudson’s Bay, the owner of Saks Fifth Avenue and other department store chains, has agreed to acquire Gilt Groupe for $250 million in cash, the company announced Thursday morning. Re/code reported on Wednesday evening that such an announcement could come as early as today.
Financially, the deal marks a disappointing outcome for Gilt, which has raised some $280 million in venture capital and at one time was valued by investors at more than $1 billion.
Strategically, however, the acquisition, which is expected to close February 1, could breathe new life into the brand. In a press release, Hudson’s Bay said Gilt customers will be able to make returns to Saks Off Fifth discount stores, which will eventually feature Gilt “concept” stores.
Hudson’s Bay said the deal should add $500 million to its 2016 fiscal year sales and about $40 million in adjusted Ebitda by fiscal year 2017. Adjusted Ebitda is a type of profitability that excludes certain expenses that companies argue do not reflect the health of their core business.
“Opportunities for revenue growth at Saks Off 5th include increased customer traffic to stores from Gilt customers making returns and sales to customers visiting Gilt concept shops inside Saks Off 5th locations,” the company said in its press announcement. “Opportunities for expense savings and operational efficiencies from combining the businesses include reduced shipping costs, increased purchasing power, and shared inventories across Gilt and Saks Off 5th.”
Gilt CEO Michelle Peluso has agreed to stay on as adviser through the spring, according to a source, paving the way for her to potentially leave later this year.
Gilt pioneered the “flash sale” e-commerce model in the U.S., selling heavily discounted fashion apparel in limited-time sales that were crazy popular in the years following the 2007-2008 recession. But over the past couple of years, flash sales on the whole have faded in popularity as retailers saturated customer e-mail inboxes with promotions and less high-end excess inventory became available. Gilt has struggled with keeping its product offering fresh as it has been forced to feature more items that can be found elsewhere.
This article originally appeared on Recode.net.