Parent company Hudson’s Bay Company (HBC.TO) has sold Lord + Taylor to Le Tote for $99.5 Million in a transaction that includes a $75 million in cash and a $25 million secured promissory note payable in cash over a two-year time period.

Through the acquisition, fashion rental subscription service, Le Tote, will acquire the Lord + Taylor brand and its intellectual property, which includes 38 stores. Le Tote will also acquire the retailer’s digital channels and inventory.

The deal between the two companies also includes two seats on Le Tote’s board of directors for Hudson’s Bay executives, certain shareholder rights, and an equity stake in the company.

“We’re excited to have reached an agreement with Le Tote that creates a new model for Lord + Taylor, bringing together fashion rental subscriptions with traditional retail,” Helena Foulkes, Hudson’s Bay CEO, said.

“Following an extensive review of strategic alternatives, Le Tote’s leadership and innovative approach is the best path forward for Lord + Taylor, its loyal customers and dedicated associates. 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.”

The agreement for sale will also keep Hudson’s Bay real estate company, HBS Global Properties, as the owner and leaser of Lord + Taylor’s store locations. Over a three-year period, Hudson’s Bay will be liable for the rent for Lord + Taylor at the locations operated by Le Tote. Hudson’s Bay said it expects to be liable for about $77 million in cash rent on an annual basis under the agreement.

In 2021, the companies will have the option to reassess the Lord + Taylor store portfolio, which could allow Hudson’s Bay to recapture select stores. Hudson’s Bay would then be able to redevelop the properties as it determines their best and most profitable use.

The sale of Lord + Taylor is expected to close at the start of the 2019 holiday season, the companies said. LE Tote is in the process of securing financing for the full purchase price, which if not obtained within 45 days, Hudson’s Bay has the right to terminate the deal.

“Since founding Le Tote, it’s been our mission to push the boundaries of retail,” Rakesh Tondon, Le Tote CEO and founder, said in a statement. “We’ve strived to lead the charge in developing innovative, intuitive, value-driven ways for customers to engage and consume.

“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. With this acquisition, we continue our journey in creating the future of retail,” Tondon added.

Lord + Taylor represented $1.4 billion of Hudson’s Bay’s $9.4 billion retail sales in fiscal 2018. Hudson’s Bay adjusted EBITDA was $462 million during the same year, which included a $119 million loss from Lord +Taylor.

Le Tote said it expects to provide the “vast majority” of Lord + Taylor employees with job opportunities.

Shares of Hudson's Bay were up 0.89 percent as of 11:16 a.m. ET on Wednesday.

Lord & Taylor
Lord & Taylor was sold by its parent company, Hudson's Bay. General view of atmosphere at the 2015 Lord & Taylor holiday windows unveiling at Lord & Taylor on November 12, 2015 in New York City. Getty Images/Noam Galai