Macy’s announced on Sunday its rejection of the $5.8 billion proposal from Arkhouse Management and its partner Brigade Capital Management to privatize the department store operator.
Macy’s cited concerns related to deal financing and valuation as the primary reasons for turning down the offer.
Similar to other longstanding department store operators, Macy’s has encountered challenges in competing with younger online rivals and counterparts with smaller physical store footprints.
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This predicament has provided Arkhouse, a real estate-focused investment firm, and Brigade, a hedge fund, with an opportunity to exert pressure on Macy’s, prompting the exploration of a potential sale.
The proposal presented by the two investment firms last month aimed to acquire the outstanding shares of Macy’s at $21 per share.
Arkhouse expressed its belief in the potential for a substantial increase to the original proposal, contingent upon being granted access to the necessary due diligence.
No Sale Process with External Bidders: Macy’s Update
Macy’s, as per sources familiar with the matter, is not engaged in a sale process with other parties, and no additional unsolicited bidders have surfaced that align with the company’s expectations for a potential deal.
The company’s criteria for a successful bidder include demonstrating committed financing and a proven track record in executing buyouts within the retail sector, as conveyed by informed individuals.
The investor group led by Arkhouse and Brigade Capital Management holds a substantial stake in Macy’s through funds managed by Arkhouse, according to Arkhouse.
Arkhouse has asserted that Jefferies, serving as the financial adviser for the buyout group, has issued a “highly confident” letter affirming their ability to secure the necessary funds for the transaction.
However, Macy’s has characterized the financing as uncommitted, citing numerous non-standard preconditions associated with it.
This bidding situation has brought attention to the perceived undervaluation of Macy’s concerning its real estate, estimated by analysts to have a value ranging between $7.5 billion to $11.6 billion.