Macy’s is in talks with Arkhouse and Brigade Capital over its previously rejected takeover offers. The department store opened its books to Arkhouse in a confidential agreement that permits the parties to share private business information, Reuters first reported March 19.
Arkhouse said in a regulatory filing with the Securities and Exchange Commission that it might need that additional information from Macy’s to potentially make a brand new bid.
This agreement is the newest development after months of forwards and backwards between Macy’s and Arkhouse. In January, Macy’s rejected a takeover offer from Arkhouse that might have taken the retailer private for $5.8 billion, or $21 a share. Then, the investment firm increased its bid to $24 per share, or $6.6 billion, on March 3. On March 14, Reuters reported that Macy’s and Arkhouse were in talks to potentially open the retailer’s books ahead of a better offer.
Macy’s and Arkhouse didn’t reply to requests for comments on negotiations.
Macy’s ranks No. 17 in Digital Commerce 360’s Top 1000 Database. The Top 1000 ranks North America’s leading retailers by online sales. It is usually the second-largest Apparel & Accessories retailer within the database.
Macy’s responses to previous Arkhouse takeover offers
The retailer rejected Arkhouse’s initial takeover bid, citing concerns over financing.
“Arkhouse and Brigade have yet to supply any financing details that might enhance the actionability of their proposal despite multiple opportunities to achieve this, and as a substitute of attempting a constructive dialogue, Arkhouse has chosen to launch a proxy contest,” Macy’s said in February.
Arkhouse responded with more details about how it might finance the deal. Specifically, investors Fortress and OneIM will help secure financing, the firm said. Those finance sources represent 100% of the capital needed to buy all of the Macy’s shares the firm doesn’t already own, it said.
In accordance with Arkhouse’s most up-to-date SEC filing, Macy’s called the second takeover bid “lower than compelling” and said that “the Board is just not currently prepared to transact at this price level.”
Macy’s has reason to be wary of the offer, said Neil Saunders, managing director of retail evaluation firm GlobalData.
“In our view, Macy’s management remain skeptical of the bid and don’t particularly just like the deal with monetizing the chain’s real estate assets,” he said. “Nevertheless, for the reason that bid price was raised, Macy’s must act within the interest of shareholders — and meaning due consideration should be given to the offer.”
“We see this as nothing short than a battle for the long run of Macy’s,” Saunders added.
Macy’s Q4 results
Macy’s reported results on Feb. 27 for its Q4 and financial 2023 ended Feb. 3. In Q4, Macy’s net sales declined 1.7% to $8.12 billion, and full-year sales declined 5.5% to $24.44 billion.
The retailer also announced a brand new strategy, “A Daring Recent Chapter.” Macy’s plans to shut 150 “unproductive” locations by the tip of 2026 while growing its luxury Bloomingdale’s and Bluemercury locations. The plan also includes reinvestment within the Macy’s name and branding, with changes to assortment and modernized stores. Macy’s said the plan will start paying off in fiscal 2025, with lower capital spending, sales growth and free money flow returning to pre-pandemic levels.
Arkhouse commented on the quarterly results and recent strategic plan in its March 3 takeover offer.
“While the restructuring plan Macy’s unveiled last week didn’t encourage investors, the fourth quarter earnings and year-end results have given us further confidence within the long-term prospects of the Company if redirected as a non-public company,” the firm said on the time.
Macy’s also faced recent executive leadership changes. Tony Spring took over as CEO on Feb. 4, replacing Jeff Gennette. Gennette will stay on as chair of the board until the 2024 annual meeting, when Spring will replace him in that role as well.
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