Macy's late Sunday rejected a $5.8 billion takeover offer that valued the struggling department store chain at about 20 percent above its closing price on Friday, but suggested it was “open to opportunity.”
The bidders, Arkhouse Management and Brigade Capital, want to acquire Macy's shares they don't already own for $21 per share and have threatened shareholders with accepting the offer.
With a possible hostile bid looming, questions are emerging about how Arkhouse and Brigade might strike a deal and whether other suitors could emerge, potentially triggering a bidding war.
In a statement released Sunday evening, Macy's board questioned whether the investment firms had the money to finance the deal, which had “no compelling value.” It noted that the offer was accompanied by a letter containing “numerous” unconventional provisions.
Macy's also questioned the financial viability of the deal. It said the companies had proposed paying 25 percent of the offer in equity. The rest of the funding would most likely come from debt such as leveraged loans, but demand for such deals has declined in part because of high interest rates.
The unsolicited offer could attract others. Arkhouse's bid for developer Columbia Property Trust in 2021 led to another buyer coming onto the scene, purchasing Columbia in a $3.9 billion deal.
Macy's has not contacted potential buyers, people familiar with the matter said. But the retailer's chairman and CEO, Jeff Gennette, said in a statement: “We remain open to opportunities that are in the best interests of the company and all of our shareholders.”
But given the challenges facing retail amid stubborn inflation and shifts in consumer spending, the list of potential suitors is short. The deleterious impact of accumulating debt on retailers through leveraged buyouts such as Payless, Toys “R” Us and Sears has deterred many private equity firms from pursuing such deals. Still, there might be some who are willing, especially if they're drawn to Macy's valuable real estate portfolio.
Macy's has been under pressure to improve its business as consumers have spent less on consumer goods. Its shares have fallen about 30 percent over the past five years as the company has lost significant market share and been forced to close stores and lay off employees. Last week it announced 2,350 job cuts.
Shares of Macy's rose on Monday, closing 3.5 percent higher.
As the company tries to turn its fortunes around, all eyes are on Tony Spring, who takes over next month after leading Bloomingdale's, Macy's much healthier luxury brand. However, repeating that success could be challenging: Macy's customers are different from Bloomingdale's customers, and the company has a large and underperforming store base.
Jordyn Holman contributed reporting.