Macy’s rejected a $5.8 billion takeover offer late Sunday that valued the struggling department store chain at about 20 percent above its closing stock price on Friday, but indicated it was “open to opportunities.”
The bidders, Arkhouse Management and Brigade Capital, are seeking to acquire Macy’s shares they don’t already own at $21 a share, and have threatened to take the offer to shareholders.
With a potential hostile bid looming, questions are mounting over how Arkhouse and Brigade will strike a deal and whether additional suitors could emerge, potentially sparking a bidding war.
In a statement issued on Sunday night, Messi’s board questioned whether investment firms had the funds to finance the deal, which it said “lacked compelling value.” She noted that the offer was accompanied by a letter containing “several” unconventional conditions.
Messi also questioned the financial feasibility of the deal. She said that the two companies proposed paying 25 percent of the offer in the form of shares. The rest of the financing is likely to come from debt such as leveraged loans, but appetite for such deals has waned, partly due to rising interest rates.
An unsolicited offer can attract others. Developer Columbia Property Trust’s 2021 Arkhouse bid brought another buyer into the picture and purchased Columbia in a $3.9 billion deal.
Macy’s has not reached out to potential buyers, people familiar with the matter said. But the retailer’s chairman and CEO, Jeff Gennette, said in a statement: “We continue to be open to opportunities that are in the best interest of the company and all of our shareholders.”
However, the list of potential suitors remains short, given the challenges the retail sector faces amid stubborn inflation and shifts in consumer spending. The damaging effect of piling debt on retailers in leveraged buyouts, such as those of Payless, Toys “R” Us, and Sears, has scared away many private equity firms from making such deals. However, there may be some willing, especially if they are attracted to Messi’s valuable real estate portfolio.
Macy’s has been under pressure to improve its business as consumers spend less on discretionary items. Its shares have fallen by about 30 percent over the past five years, as the company lost significant market share and was forced to close stores and lay off employees. It announced last week that it would eliminate 2,350 jobs.
Macy’s shares rose 2.6 percent in Monday afternoon trading.
As the company attempts to turn around its fortunes, all eyes are on Tony Spring, who will take over as CEO next month after leading Bloomingdale’s, Macy’s, an upscale, healthier brand. But replicating that success may be difficult: Macy’s shoppers are different from Bloomingdale’s, and it has a large, poorly performing store base.
Jordyn Holman Contributed to reports.