Macy’s Rejects $5.8 Billion Buyout Bid From Investors Despite Struggles
Macy’s announced on Sunday that its board rejected a $5.8 billion take-private buyout bid from an investor group led by Arkhouse Management and Brigade Capital Management. The retailer cited a “lack of compelling value” and also raised financing concerns over the $21 per share offer.
The bid by Arkhouse and Brigade represented a 32% premium over Macy’s stock price in early December when the proposal was first made. However, Macy’s did not feel the deal provided enough return for shareholders given the company’s underlying value.
Macy’s has faced declining sales and falling profits in recent years as consumers shift more spending online and away from traditional department stores. The company’s stock price has dropped 28% over the past 5 years, badly underperforming the S&P 500 index.
The retailer recently announced it would close 5 more stores and cut 3.5% of its workforce despite a relatively strong 2022 holiday season. These layoffs of over 2,300 employees signal continued challenges for the brand heading into 2024.
Analysts speculate that potential buyers are more interested in Macy’s real estate holdings than its retail operations. Flagship locations like its famed Herald Square store in New York City are worth billions. Selling off these properties could leave Macy’s a mere shell in the future.
With the board rejecting Arkhouse’s bid, Macy’s risky choice is to try turning around the business itself. The company has brought in a new CEO, Tony Spring, to replace the outgoing Jeff Gennette starting in February.
The path forward likely involves closing underperforming stores, focusing on the most profitable units, developing its online presence, and attracting younger consumers. But in the rapidly shifting retail landscape, the 165-year-old company still faces a highly uncertain future.
The next few weeks could see Arkhouse return with a higher bid, a rival buyer emerge, or an alternate deal structure to address Macy’s concerns. But after passing on this $5.8 billion offer, the pressure is on for Macy’s to deliver improved shareholder value.
