Macy’s announced Monday that its board of directors has unanimously rejected an unsolicited proposal from private equity firm Arkhouse Capital to acquire the retailer for $5.8 billion. Arkhouse has threatened to take its offer directly to Macy’s shareholders if the company does not reconsider. This latest takeover drama comes as Macy’s struggles to keep pace with changing consumer shopping habits and intense competition.
Background of the Bid
On January 21st, Arkhouse Capital submitted a proposal to acquire Macy’s for $22 per share, representing a 63% premium over Macy’s closing share price on January 20th. This values Macy’s at approximately $5.8 billion.
In a press release, Arkhouse said it already owns 4% of Macy’s shares outstanding and was “highly confident” it could secure financing for the deal. Arkhouse argued the offer represented a “superior outcome” for shareholders compared to Macy’s staying as a standalone public company.
Macy’s generates around $25 billion in annual revenue from its department stores and online operations. The company has significant real estate holdings, including owning many of its store locations.
Arkhouse likely views Macy’s real estate and undervalued brand as opportunities, analysts say. Department stores have struggled in recent years, and Macy’s stock price has stagnated. Arkhouse sees a chance to unlock shareholder value.
Macy’s Rationale for Rejection
However, Macy’s rejected the bid, saying it significantly undervalued the company and cited concerns over Arkhouse’s ability to finance the deal. Macy’s board decided the proposal was “not in the best interest of Macy’s and its shareholders.”
In a letter to Arkhouse, Macy’s said the company is “confident that Macy’s current record of profitable growth as a public company will deliver more value for shareholders over time.”
Here are some of the main reasons why Macy’s rejected the bid, according to retail analysts:
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Price was too low: Macy’s likely believes it is worth more than $5.8 billion as it executes its turnaround strategy. The board thinks staying independent will create more long-term value.
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Doubt in Arkhouse’s ability to finance the deal: Arkhouse would need over $5 billion in debt financing. The credit market is uncertain now, making financing difficult.
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Ongoing business momentum: Macy’s had strong holiday sales, which could indicate its strategy is gaining traction. The board may want to stay the course rather than sell low.
Arkhouse Threatens to Go Directly to Shareholders
Shortly after Macy’s rejected its bid, Arkhouse said it “remains committed” to the acquisition and threatened to take its offer directly to Macy’s shareholders. Arkhouse could launch a hostile takeover attempt.
Arkhouse argued that Macy’s needed to provide analysis supporting the board’s claim that continued independence would deliver superior value compared to its offer.
By taking the offer to shareholders directly, Arkhouse hopes to put pressure on Macy’s board to reconsider. But winning shareholder support could still prove challenging.
What’s Next in the Takeover Drama
As Arkhouse weighs its next move, here is what could happen next:
- Arkhouse formally launches tender offer to shareholders
- Macy’s implements “poison pill” defense to fend off Arkhouse
- Arkhouse attempts to replace Macy’s board members
- Macy’s seeks competing bids/white knight acquirer
- Arkhouse raises its offer price
This is an unfolding situation. Macy’s stock rose 7% on news of the rejected bid, indicating investors see potential for a higher offer. The battle for the future of the legendary department store chain continues.
Financial Snapshot
Below is a summary of key financial metrics for Macy’s:
| Metric | Value |
|---|---|
| Market Cap | $7.3 billion |
| Enterprise Value | $15.6 billion |
| Annual Revenue | $25 billion |
| Net Income | $1.4 billion |
| P/E Ratio | 4.5x |
| EV/EBITDA | 3.6x |
*Data from latest fiscal year financials
This table gives a sense of Macy’s size as a company and valuation. Relevant metrics to consider are the P/E and EV/EBITDA multiples, which Arkhouse argues undervalue Macy’s intrinsic worth. The board believes Macy’s will be worth more than 5.8x EBITDA as an independent company.
To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.
