The activist investor group seeking to buy Macy's increased pressure on the department store chain on Sunday, raising its bid and revealing additional details about its financing plans.
Arkhouse Management and Brigade Capital Management said In a press release They're now offering $24 per share, valuing the retailer at $6.6 billion. The new offer is higher than the $21 per share they last offered as well as a 33.3 percent premium to Macy's closing stock price of $18.01 on Friday.
Arkhouse and Brigade have named additional investors they have brought on as equity partners, Fortress Investment Group and One Investment Management. Arkhouse and Brigade also said, in an apparent response to Macy's questions about its financing, that they have “identified significant global institutional funding sources” that “represent 100 percent of the capital required to purchase equity in Macy's that we do not already own.”
The retailer has been facing pressure from an investor group since December, when the group made a bid to take Macy's private for $5.8 billion. Unless the retailer starts sharing non-public information, it may accept its offer to shareholders, Arkhouse said. The investor has since nominated nine people to Macy's board of directors.
Macy's said Sunday it would “carefully review and evaluate the latest proposal.”
“Macy's Board of Directors has a proven track record of evaluating a wide range of options to create shareholder value, is open about the best path to achieving this goal and is committed to continuing to take actions that it believes are in the best interest of the company and all Macy's shareholders,” the company said in a statement.
The retailer is trying to stay focused on its own turnaround strategy.
Last week, Macy's announced a strategy that will dramatically change the makeup of the company. It said it would close 150 of its namesake stores over three years, while also opening more locations in its upscale Bloomingdale's and Bluemercury chains.
“I hope we close the company before they start closing stores,” Gavriel Kahane, managing partner at Arkhouse, said in an interview.
“The proposal offers the best path forward for Macy's shareholders by allowing them to benefit from the company's significant unrealized value,” said Matt Birkal, partner and head of special situations at Brigade.
As a department store, Macy's has struggled to win over customers who increasingly shop in the e-commerce world as indoor malls close. Macy's has reported declining sales over the past few quarters.
Its new CEO, Tony Spring, who spent his four-decade career at Bloomingdale's, admitted that shopping at Macy's is not a pleasant experience. Shoppers often encounter cluttered stores with poorly displayed clothing and have difficulty finding staff. The retailer said it plans to have 350 remaining locations by the end of 2026 and that capital gained from the closures will flow into the remaining stores.
Mr. Kahane said that if the company were taken private, investors would focus on turning around the department store business, a feat he said would be easier if the retailer were private. He also disputed analyst speculation that he wanted the retailer solely for his properties.
He added: “It is clear that we are here for real estate rights.” Kahane said. “We're here because we think they have a lot of properties on the balance sheet, and those properties are valuable because they have a great tenant.“.
He played down speculation by some retail analysts that investors were simply hoping another buyer would jump in ahead of them.
“I would feel much worse if someone came and beat us here,” he added. Kahane said. “I'd be more surprised, too.”
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