Canada-based Hudson’s Bay, which owns Sak’s Fifth Avenue, is in negotiations with European retailer Signa Holding over a potential joint venture (JV).

Although several media outlets reported that the Canadian retailer has signed a binding agreement to divest or merge its European operations, the firm has clarified that it has signed a non-binding letter of intent with regards to the exploration of this potential JV.

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Hudson’s Bay (HBC) also added that any potential transaction is subject to its further review and analysis, approval by its board of directors, as well as many conditions, including due diligence and third party approvals that are outside of the company’s control.

It also stated: “There can be no assurance that any such discussions will ultimately lead to a transaction.”

Set up in 1670, HBC is the oldest company in North America. Its portfolio comprises different formats, including luxury department stores and off-price fashion shopping sites. It has more than 480 stores and around 65,000 employees.

“The sources have told the news agency that Signa would have a majority stake in the JV, while HBC may get almost $1.17bn as part of the deal.”

The firm’s leading banners across North America and Europe include Hudson’s Bay, Lord & Taylor, Saks Fifth Avenue, Saks OFF 5TH, Galeria Kaufhof, and department store group Galeria INNO.

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Some people familiar with the matter told Reuters that the two firms had agreed in principle to combine their department store chains Kaufhof and Karstadt, and soon a deal could be announced.

The sources have told the news agency that Signa would have a majority stake in the JV, while HBC may get almost $1.17bn as part of the deal.

Kaufhof operates 96 stores, while Karstadt runs 82 outlets in Germany.

In 2015, Hudson’s Bay acquired Kaufhof for €2.8bn from German retailer Metro. Earlier this year, the retailer did not accept Signa’s €3bn offer for Kaufhof.