JoeCanuck

MINNEAPOLIS — Zellers stores across Canada will disappear in a couple of years, as major U.S. retailer Target moves in.

Target (NYSE:TGT) is spending $1.83 billion to buy up the leasehold interests in 220 Zellers stores from the storied Hudson's Bay Company.

Though Target says the Zellers brand won't disappear immediately, the deal is the first step in a plan to open between 100 to 150 Target stores by 2013.

The U.S. retailer, which helped coin the phrase "discount chic," has long been exploring opportunities north of the border.

However it hit several roadblocks that run the gamut from unattractive real estate locations for potential stores to the economic slowdown that reined in consumer spending.

Target says that under the agreement Zellers will continue to lease the locations from Target and run them as Zellers stores "for a period of time."

After years of anticipation Canadian consumers can soon set their sights on a new shopping destination, as U.S. discount retailer Target has announced plans to set up its stores north of the border.

Target Corporation said Thursday that it is paying the Hudson's Bay Company $1.825 billion to acquire the leasehold interests in 220 Zellers locations across Canada.

Target says the deal doesn't mean an immediate end to the Zellers brand, but is rather the first step in opening between 100 and 150 of its own stores here by 2014.

Although the money is expected to change hands in May and September of this year, "Zellers Inc. will sublease these sites from Target and continue to operate them under the Zellers banner for a period of time," the company said in a statement announcing the deal Thursday.

According to Target's chairman and CEO, his company's first move outside the U.S. will be a boon for Canadian consumers interested in a "superior shopping experience."

"We are very excited to bring our broad assortment of unique, high-quality merchandise at exceptional values and our convenient shopping environment to Canadian guests coast-to-coast," Gregg Steinhafel said in a press release promising "a more robust Target presence in Canada over time."

Commenting on the deal in a statement Thursday, Hudson's Bay Company Governor Richard Baker said, "This transaction provides attractive long term value and will allow us to invest substantial capital into our department store and specialty store businesses to continue to drive growth."

Target expects to spend approximately $1 billion to remodel and reopen the existing Zellers stores under its own brand. The company also says it will have hired up to 20,000 people once its stores are operational.

The Minneapolis-based company's more than 1,700 stores across the U.S. have long been a favourite of shoppers on the hunt for what the retailer has dubbed "discount-chic".

While speculation has been rife the company was considering a move north of the border for some time, Target only confirmed its international expansion plans in June of last year.

It had been stymied, however, by the hunt for suitable locations, and most recently, the economic slowdown.

Baker, whose U.S.-based real estate development company NRDC Equity Partners LLC enjoys strong ties with many of the biggest retailers south of the border, paid $1.1 billion to acquire the Hudson's Bay Company in 2008.