An alliance of Arkhouse Management and Brigade Capital has proposed a $5.8 billion bid to privatize the renowned department store Macy’s, as disclosed by a source knowledgeable about the situation.
Arkhouse Management, specializing in real estate investments, and Brigade Capital Management, a global investment firm, offered to buy the remaining shares of Macy’s for $21 per share on December 1st, according to the source who spoke on Sunday. This development was initially reported by The Wall Street Journal on Sunday afternoon.
This proposition values the parent company of Bloomingdale’s at a 20.76% premium over its Friday closing price of $17.39.
Before the market opened on Monday, Macy’s shares had surged to $20.78, an increase of nearly 20%. In the wake of this news, shares of other department store chains like Kohl’s and Nordstrom also saw a premarket rise of about 4%.
The investor group, already holding a significant portion of Macy’s through funds managed by Arkhouse, has engaged in discussions about the acquisition with the company. While Macy’s board has convened to consider the offer, it remains uncertain how the retailer perceives this bid.
Arkhouse and Brigade are of the opinion that Macy’s current valuation in public markets is lower than it should be. According to the WSJ report, they have shown readiness to increase their offer pending further due diligence. The report also mentions that an investment bank has issued a letter backing the consortium’s capability to secure the required financing for the transaction.
In response to inquiries, Macy’s has chosen not to comment. Requests for comments from Arkhouse and Brigade were not immediately answered by Reuters.
Recently, Macy’s exceeded analysts’ profit expectations for the quarter, thanks to reduced inventory levels and robust demand for beauty products in November. This success indicates that the company’s efforts to cut down inventory from the highs of 2022 are paying off, just in time for the crucial holiday shopping season.
Macy’s, with a market capitalization of approximately $4.77 billion, has seen its share value drop by about 15.79% this year.
There is some uncertainty regarding whether Arkhouse and Brigade have the capacity to follow through on such a large deal, especially since they have not undertaken a transaction of this scale before.
A previous bid of $2.4 billion by a consortium led by Arkhouse for the real estate investment trust Columbia Property Trust was unsuccessful, with Pimco eventually acquiring Columbia Property for $3.9 billion.
