Hudson's Bay, operator of department store chains Lord & Taylor in the United States and The Bay in Canada, said on Monday that it would buy luxury retailer Saks for $16 (10.41 pounds) per share, or $2.9 billion in cash, including debt.

Saks, famous for its iconic Fifth Avenue flagship in Manhattan, will operate separately within HBC and have its own merchandising, marketing and store operations teams. It will also keep its New York headquarters.

HBC said it planned to bring Saks into Canada, where it will compete with retailers like Holt Renfrew, as well as Nordstrom, which is in the process of entering that market.

There is a 40-day "go-shop" period when Saks can seek better bids, but the company does not anticipate getting any.

The combined company would have marquee flagship stores in cities such as New York, Montreal and Toronto, and HBC said it would consider creating a real estate investment trust to benefit from that portfolio.

The $16-per-share offer represents a 30.3 percent premium over Saks' shares' level on May 20, when media reports emerged the company was up for sale. The stock had previously hit those levels in early 2008, before the recession decimated luxury spending.