Macy's announced on Sunday that it has turned down a $5.8 billion offer from Arkhouse Management and Brigade Capital Management to buy the company and make it private. The department store cited worries about the deal's funding and value.
Like other traditional department stores, Macy's has found it challenging to keep up with newer online rivals and those with fewer physical stores. This situation has allowed Arkhouse, a firm specializing in real estate investments, and Brigade, a hedge fund, to push Macy's to consider selling the business.
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Macy's Rejects $21 Per Share Offer
Arkhouse and Brigade Capital Management proposed to buy each share of Macy's they don't own for $21. Following this news, shares of the New York-based department store increased by 3.6%, closing at $18.26 on Monday.
The board of Macy's reviewed the offer from the investment firms and raised concerns about the financing. They also believed the proposal did not offer enough value.
Jeff Gennette, the outgoing chairman and CEO of Macy's, stated, "After thorough examination and attempts to get more details from Arkhouse and Brigade, the board concluded that their proposal is not feasible and does not offer enough value to Macy's Inc. shareholders. We remain open to opportunities that serve the company's and all shareholders' best interests.
Next month, Tony Spring will become Macy's' new president and CEO.
Neil Saunders, the managing director of GlobalData, shared in an email that Macy's leadership doesn't seem interested in making a deal. He believes that Macy's is skeptical about Arkhouse's real-estate-focused strategy, which could bring short-term benefits but harm the company in the long run.
Saunders also pointed out that Macy's has been struggling to enhance its value, having overlooked its stores and fundamental retail practices for a long time.
"Macy's shareholders are in a tough spot. They can either support the current management's plans or sell to an investor whose intentions are unclear and might accelerate the decline of this famous retail brand," Saunders remarked.
This situation arises as Macy's and other department stores face the challenge of boosting their sales.
Macy's Evaluates Investor Group's Bid Amid Real Estate Value Debate
The investor group led by Arkhouse and Brigade Capital Management, which holds a considerable portion of Macy's through funds managed by Arkhouse, has expressed interest in the company.
Arkhouse disclosed that Jefferies, the financial adviser for the buyout group, has issued a confident statement about their capability to secure the needed funds for the deal.
However, Macy's criticized the financing offer as uncommitted and laden with unusual conditions.
The bid from the investment firms has brought attention to the perceived undervaluation of Macy's, especially considering its real estate assets. Analysts estimate these assets are worth between $7.5 billion and $11.6 billion.
As of the end of January, Macy's owned 316 of its 722 stores, as reported in its latest annual statement.
Macy's recently announced plans to cut 2,350 jobs and close five stores to streamline its operations.
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