Macy's Faces Potential Buyout as Investors See Opportunity

According to a source familiar with the situation on Sunday, an investment consortium led by Brigade Capital and Arkhouse Management has made a $5.8 billion bid to take department store operator Macy's private.

According to the individual, on December 1, two investment firms with a specialty on real estate, Arkhouse Management and Brigade Capital Management, filed a proposal to purchase the Macy's shares that they do not currently hold for $21 per share. The offer was first published earlier on Sunday afternoon by The Wall Street Journal.

The Bloomingdale's parent company is being offered a 20.76% premium over its Friday closing price of $17.39.

The department store chain's board convened to examine the offer after the group, which already has a sizable share in the company through Arkhouse-managed funds, reviewed the offer with them. The individual with knowledge of the situation stated that it is unclear how the store feels about the plan.

According to the WSJ story, Arkhouse and Brigade feel Macy's is undervalued in the public markets and have expressed a willingness to increase the offer, subject to due diligence. An investment bank has also supplied a letter confirming the group's capacity to secure the funding required to close the deal.

Due to reduced inventory and robust demand for beauty items in November, the store exceeded analysts' expectations for quarterly earnings, indicating that efforts to reduce inventory from 2022 highs were finally paying off before of the crucial Christmas shopping season.

With a $4.77 billion market valuation, Macy's shares have decreased by over 15.79% so far this year.

Given that Arkhouse and Brigade have not before completed any project of this size, it is uncertain if they have the resources to carry out a transaction of this scale.

Two years ago, a consortium of investors led by Arkhouse made an unsuccessful $2.4 billion bid for the real estate investment trust Columbia Property Trust. Columbia Property was later purchased by Pimco for $3.9 billion.

Macy's Surpasses Analyst Expectations Amidst Inventory Optimization

The deal for Macy's, the biggest department store chain in the US, is made right before the holidays, a critical time of year that may have a significant impact on a retailer's earnings.

Additionally, the department shop has been getting ready for an executive change. Since 2017, Jeff Gennette has served as its CEO. He has stated that he would resign in February. Tony Spring, who presently oversees Bloomingdale's, the company's upmarket retail business, will follow him.

Similar to its competitors, Macy's has been working to enhance its online shopping experience and eliminate its underperforming physical shops. Due to the impact of inflation, the company's core clientele has shrunk this year following a pandemic buying frenzy.

Many customers have reduced their spending on apparel and other discretionary products as a result of rising grocery and other daily expense costs. Additionally, Macy's is trying to attract a new generation of consumers who are more comfortable purchasing online rather than at big-box shops.