An investor group has made a bid for iconic department store chain Macy's that would take the retailer private in a deal worth $5.8 billion, according to a person familiar with the offer, more than $1 billion above its current market value.
Arkhouse Management, an investment firm that focuses on so-called “mispriced” publicly traded real estate assets, and Brigade Capital Management, an asset manager, offered $21 a share for Macy's on Dec. 1, according to the person who spoke on the condition anonymity, as the offer remains confidential. This price represents a significant premium to Macy's current stock price.
According to the person, the companies already have a stake in Macy's. While it wasn't immediately clear how the investor group planned to finance the rest of the deal, department stores have been the target of takeover attempts in recent years by investors looking to secure prime real estate. Macy's valuable real estate holdings include its flagship Herald Square location.
Neil Saunders, managing director of retail consultancy GlobalData, warned against such deals on Sunday.
“An investor group that sells real estate and perhaps takes other actions, such as spinning off the e-commerce business, would certainly see some short-term gains,” Mr. Saunders wrote in a statement. “But if some of those profits were not reinvested in revitalizing the core retail business, Macy's would be left in the worst of all worlds.”
The Wall Street Journal had previously reported on the takeover offer.
The offer for Macy's, the largest department store chain in the United States, comes right in the middle of the holiday shopping season, a crucial time that can have a huge impact on a retailer's year. The department store has also been preparing for a change in leadership. Jeff Gennette, the company's CEO since 2017, has announced he will retire in February. He will be succeeded by Tony Spring, who currently runs Bloomingdale's, the company's upscale store chain.
The offer represents a 32 percent premium to Macy's shares' closing price on Friday of $17.39. The retailer's shares have fallen about 20 percent over the past year as its 500 brick-and-mortar stores nationwide have struggled to assert itself against the competition from digital retail.
Like its competitors, Macy's has sought to weed out its underperforming retail stores and improve its online shopping experience. After a pandemic shopping boom, its core customers have pulled back this year as inflation took its toll. Higher costs for groceries and other everyday expenses have led many consumers to limit their spending on clothing and necessities. Macy's also hopes to attract a new generation of customers who prefer shopping online rather than in big department stores.
Macy's net sales fell 7 percent last quarter. In a call with analysts, Mr. Spring highlighted the growth of the company's newer, smaller stores and its e-commerce expansion. “I'm confident we can grow Macy's Inc. into a more relevant destination,” he said. “The basics are there.”