A group of investors has offered to acquire Macy’s for $5.8 billion with plans to take the iconic department store chain private. The bid comes from private equity firm The ArkHouse Partners LLC and hedge fund Brigade Capital Management, offering $20 per share in an all-cash deal.
Buyout Group Sees Value in Revamping Macy’s Business
The investor group believes Macy’s would be better positioned to execute a turnaround as a private company. According to sources, the consortium thinks Macy’s has strong underlying real estate value and sees potential to improve merchandising and brand partnerships away from short-term public market pressures.
Analysts say going private could give Macy’s time and flexibility to rightsize its footprint and better reinvent itself for modern consumers. The bid suggests serious intent, offering a 36% premium over Macy’s stock price before news of the proposal leaked.
Macy’s Mulling Sizeable Offer From Experienced Investors
Macy’s confirmed it has received and is evaluating the proposal but has not made further comments. People close to the situation say Macy’s is expected to seriously consider the offer given the investors have experience in retail and the resources to complete a leveraged buyout.
Arkhouse Partners is a relatively new fund led by James Smith, former vice chairman of fashion company Vince. Brigade Capital is a $10+ billion asset manager founded in 2006 by Donald Morgan III, who has invested in retailers previously.
| Investor Group Bidding for Macy’s | Description |
|---|---|
| The ArkHouse Partners LLC | Private equity firm launched 2022 by James Smith, former executive at fashion brands |
| Brigade Capital Management | $10B+ hedge fund founded 2006 by Donald Morgan III with retail investments |
Together the group clearly sees an opportunity in bringing Macy’s private even as the retailer struggles with industry upheaval.
Macy’s Faces Pressure Amid Shifting Retail Landscape
The bold offer comes at a challenging time for Macy’s and department stores. Macy’s stock had fallen nearly 50% over the past five years leading up to the bid, as shifts in consumer preferences and shopping habits challenged its core mall-based business.
Like peers, Macy’s faces pressure from increased e-commerce adoption and discount chains. Foot traffic at malls is declining while off-price and online-first brands chip away market share. Macy’s has worked to adapt its nearly 850 store footprint to this new reality.
To turn itself around, Macy’s has invested heavily in its e-commerce operations, placed big bets on private label brands, experimented with curated smaller-format shops, explored business ventures such as third-party marketplace services, and pursued various restructuring efforts.
The company has shown some promising signs, delivering strong 2022 holiday sales. However, the environment remains intensely competitive. Going private could allow Macy’s to focus its strategy over a longer period without quarter-to-quarter scrutiny and better position itself for an eventual turnaround or breakup down the road.
Deal Outlook Uncertain But Would Shift Retail Landscape
It remains unclear if a deal will ultimately materialize. Macy’s board and management will certainly do their due diligence before moving forward. Experts think Macy’s could negotiate for a higher valuation or seek competing bids to extract the best deal.
But if Macy’s is taken private, it would represent a major move for the retail industry. Together with recent buyouts of chains like Kohl’s and Nordstrom’s, a Macy’s deal could accelerate the decline of traditional department stores as more leverage shifts towards discount and online players.
With only a handful of national chains left, more consolidation seems inevitable. Those companies unable to successfully adapt their large physical footprints likely face reckoning from investors no longer willing to wait for turnarounds. For better or worse, this latest buyout bid could signal big changes ahead for the iconic Macy’s brand.
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