Macy's Rejects Takeover Offer, But Remains 'Open to Opportunities'
The retailer Macy's rejected a $5.8 billion takeover bid Late on Sunday the struggling department store chain was valued at around 20 percent above Friday's closing price, but suggested it was “open to opportunities”.
The bidders, Arkhouse Management and Brigade Capital, are seeking to acquire the shares of Macy's they do not already own for $21 per share. threatened to submit the offer to shareholders.
With a potentially hostile bid looming, questions are being raised about how Arkhouse and Brigade might strike a deal and whether more suitors could emerge, potentially setting off 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 they said “lacks compelling value.” It noted that the offer was accompanied by a letter containing “numerous” non-traditional provisions.
Macy's also questioned the financial viability of the deal. It said the companies had proposed to pay 25 percent of the offer in shares. The rest of the financing would likely come from debt, such as leveraged loans, but interest in such deals has waned, partly thanks to high interest rates.
The unsolicited offer could attract others. Arkhouses 2021 offer for the developer that led Columbia Property Trust another buyer enters the picture and buy 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.”
Still, the list of potential suitors is short, given the challenges the retail industry faces amid persistent inflation and shifts in consumer spending. The damaging effect of piling on debt on a retailer through leveraged buyouts, such as those of Payless, Toys “R” Us and Sears, has deterred many private equity firms from making such deals. Still, there may be those who are willing, especially if they're attracted to Macy's valuable real estate portfolio.
Macy's is under pressure to improve its operations as consumers have spent less on durable items. Its shares have fallen about 30 percent over the past five years as the company lost significant market share and was forced to close stores and lay off staff. Last week, the company announced it would cut 2,350 jobs.
Shares of Macy's rose 3.4 percent Monday morning.
As the company tries to turn its fortunes around, all eyes are on Tony Spring, who takes over as CEO next month after leading Bloomingdale's, Macy's much healthier, more expensive brand. But duplicating that success could be a challenge: Macy's customers are different from Bloomingdale's customers, and the company has a large and underperforming store base.
Jordyn Holman reporting contributed.