Cincinnati, Ohio-based Macy's has around 900 stores in the U.S., which includes its Bloomingdale's outlets and its flagship store in New York City's Herald Square.
Hudson's Bay is well known for making money off its real estate assets. After buying Saks for $2.9 billion in 2013, it secured a $1.25 billion 20-year mortgage for its Fifth Avenue flagship location in New York, valuing the property at $3.7 billion.
Should Hudson's Bay acquire Macy's, it will likely bring similar real estate prowess to the jewel locations owned by the retailer. Still, should Hudson's Bay opt to sell some of Macy's less desirable locations, it would have to compete with a flood of properties for sale, as other struggling retailers also shed properties.
Hudson's Bay has traditionally financed deals through its joint ventures, giving it the ability to pull off deals that many peers might struggle to do without impacting their credit rating.
It has a partnership with Canada's RioCan Real Estate Investment Trust and with U.S.-based Simon Property Group Inc.
Hudson's Bay could raise equity and debt against its real estate portfolio to fund the deal, according to the Wall Street Journal, which first reported the news.
Cowen and Company said in an analyst note that Macys has attractive qualities for a buyer, including a low price to earnings valuation of 10 times, $2.8 billion of free cash flow and a large real estate portfolio. But chances of a deal were dim, the note said.
Macy's struggling turnaround and the continued pressure it faces from Amazon make a deal unlikely, Cowen said in the note, adding that Amazon itself could be a potential buyer of the company, given its expansion into physical stores.
Amazon did not immediately return a request for comment.
Founded in 1670, Hudson's Bay began as primarily a fur trading business and once owned more than 40 percent of what is now Canada, and also a significant portion of Minnesota and North Dakota.
It was acquired in 2008 by mall developer NRDC Equity Partners, headed by Richard Baker. The company, which is still run by Baker, went public in 2012.