Macy’s announced its decision to turn down a $5.8 billion proposal from Arkhouse Management and Brigade Capital Management to take the department store operator private. Citing concerns over deal financing and valuation, Macy’s declined the offer, marking a significant development in the company’s strategic direction.
Like many traditional department stores, Macy’s has faced challenges in competing with online retailers and smaller brick-and-mortar businesses. This dynamic has provided an opportunity for Arkhouse, a real estate-focused investment firm, and Brigade, a hedge fund, to pressure Macy’s into considering a sale. The two firms submitted a proposal last month to acquire the shares of Macy’s they don’t already own for $21 per share. In response, Arkhouse expressed willingness to increase the offer if granted access to due diligence.
However, Macy’s board deemed the offer financially unattractive and lacking in credibility, leading to the rejection of the proposal. The company stated that the information provided by Arkhouse and Brigade did not address the board’s concerns regarding the financing of the proposed transaction.
Macy’s clarified that it is not currently engaged in a sale process with other parties, and no other unsolicited bidders meeting the company’s expectations have emerged. The company emphasized the importance of committed financing and a strong track record in retail buyouts for any potential bidder.
Arkhouse highlighted its significant stake in Macy’s through Arkhouse-managed funds and mentioned that investment bank Jefferies, serving as the buyout group’s financial adviser, had provided a letter expressing confidence in the group’s ability to raise the necessary funds.
Despite this, Macy’s characterized the financing as uncommitted and subject to non-standard preconditions. The bid by Arkhouse and Brigade has drawn attention to the potential undervaluation of Macy’s in relation to its real estate, which analysts estimate to be worth billions of dollars.
As part of its efforts to streamline operations, Macy’s recently announced plans to cut 2,350 jobs and close five stores. This move reflects the company’s ongoing efforts to adapt to changing market dynamics and improve its financial performance in the face of evolving consumer preferences.
The rejection of the privatization bid marks a significant decision for Macy’s and underscores the company’s commitment to evaluating offers that align with its strategic objectives and deliver value to shareholders.
(Source: Reuters | Axios | CNBC)
