Macy’s
has once again become a takeover target, and the stock is soaring.
A group of investors has offered $5.8 billion to buy the retailer and take it private, The Wall Street Journal reported Sunday. Arkhouse Management, an investing firm focused on real estate, and global asset manager Brigade Capital made the proposal on Dec. 1, according to the report, which cited people familiar with the matter.
The group, which already has a large stake in
Macy’s,
offered to buy the remaining shares for $21 a share, the report said. The investors have discussed the offer with the retailer, the report added.
The stock jumped 19% to $20.72 in early trading Monday. According to Dow Jones Market Data, that put it on track for its largest percentage increase since Nov. 18, 2021, when the retailer said it had started looking into spinning off its e-commerce business.
Macy’s and Brigade declined to comment. Arkhouse didn’t immediately respond to requests for comment.
The investor group believes Macy’s is undervalued in the public market and could be willing to increase its offer, the Journal reported. The stock is trading significantly below the highs of around $70 reached in 2015 after years of intense competition from online retailers. Many other department stores have struggled with the same challenge.
“Because department stores sell “other people’s stuff,” they face secular challenges as the world moves more and more to Ecom,” wrote Citi analyst Paul Lejuez. “Mall-based department stores such as M have additional challenges in that mall traffic had been declining significantly in the years prior to the pandemic.”
Macy’s is currently in the middle of a multiyear turnaround plan. The company has shaken up its C-suite and launched several initiatives, expanding its brand partnerships, improving its private-label offerings, and opening more small-format stores.
And while those efforts have somewhat helped improve sentiment among analysts, as of Friday’s close, the shares were still down 16% in 2023, even though they had climbed 59% over the past month.
To truly turn things around, Lejuez believes, the company needs to close more stores, a move the company has avoided because most of its stores are profitable and it owns most of its locations.
“As a private company, management may be more willing to make the decision to close additional locations,” he wrote.
This isn’t the first time that Macy’s has become a takeover target. In 2017, the Canadian holding company Hudson’s Bay, which operates department stores under that name, and also owns Saks Fifth Avenue, approached the company with an offer. In 2021, the company faced pressure from activist investors to spin off its e-commerce business, but ultimately decided against it.
Macy’s expansive real estate portfolio is part of the reason it is an attractive takeover candidate, Lejuez wrote. As of its latest quarterly filing, Macy’s property and equipment were a $5.8 billion asset on the company’s balance sheet, comprising roughly a third of the company’s total assets.
The stores are often in prime, valuable locations, such as Herald Square in New York City, and there is probably more that could be done to make money from the space, experts say.
“[The firms] are hoping that the place Macy’s enjoys in the larger culture, including the extravagant holiday window displays in its New York City stores, as well as the Macy’s Thanksgiving Day Parade, will help the company avoid the fates of its storied brethren,” wrote a team of Fundstrat advisors.
They pointed to other department stores like JCPenney, Neiman Marcus, and Lord & Taylor, which all went bankrupt during the pandemic.
The premium being offered for Macy’s boosted the shares of its rivals in early trading.
Kohl’s
stock rose 5% and
Nordstrom
was up 4.5%.
Write to Callum Keown at [email protected]
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