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HBC isn’t the first company forced to scale back the terms of its initial public offering.Jim Ross/The Globe and Mail

Hudson's Bay Co. is on the verge of finalizing its long-awaited initial public offering, but must trim the deal size and chop its valuation in order to bring wary investors on board.

The retailer on Monday tabled an offering worth $365-million, for which new shares would be priced between $17 and $18. At these levels, the company would be worth about $2.1-billion.

The deal has been in the works for nearly two years. Early in 2011, Richard Baker, HBC's current owner, initiated talks with Canadian investment bankers to lay the groundwork for an IPO, and the company had every intention of launching its offering last fall. Come October, however, the offering was shelved because the market was much too choppy.

Mr. Baker tried his luck again in 2012, and this time the deal is just about done – albeit at a discount to the initial expectations. When HBC started marketing the IPO in October, the share-price range was set between $18.50 and $21, and the retailer hoped to raise $400-million.

Because of the more modest ambitions, current shareholders looking to unload some of their holdings through the IPO are now scaling back the amount they are offering up. Originally, these shares were supposed to account for $150-million of the $400-million total, but they now amount to just $115-million of $365-million, a drop of 23 per cent. The number of new shares being issued – known as treasury shares – will not fall.

Concessions aside, Mr. Baker can be thankful that his team got the deal done in a soft market that brought down other IPOs. Just two weeks ago, Meranex Energy Trust, an oil and gas company, pulled its Canadian IPO because of weak institutional demand.

And HBC isn't the first company that was forced to scale back its terms in order to get the deal done. In 2011, Gibson Energy Inc. launched a $500-million IPO just as oil prices plunged, forcing the company to lower its share price to $16 from the target range of $18 to $22. In the end, it paid off. The lower price convinced investors to buy, and those that still hold their shares have seen 41-per-cent gains, all while earning a juicy dividend.

HBC's owners have been desperate to cash in for some time. Richard Baker first went on the record with his desire to go public back in June, 2011, and after the IPO plans were shelved in October, 2011, Bay Street knew it was just a matter of market timing before they were dusted off again.

This time, HBC intended to raise $400-million to pay down debt and clean up its balance sheet just before U.S. rivals such as Target Corp. and Nordstrom Inc. cross the border into Canada.

Last year HBC, comprising the Bay, Lord & Taylor and Home Outfitters, posted a profit of $57-million after losing $160-million two years earlier. The company's sales per square foot, according to its prospectus, are $152 over all, far off the North American average of $240 (U.S.). In this category, the Bay is far worse off, with sales per square foot of $133 (Canadian), versus Lord & Taylor's $210 (U.S.).