In a strategic move to counter the impact of online competitors on Macy’s value, investor group Arkhouse Management and Brigade Capital Management have presented a $5.8 billion offer to take the iconic department store chain private. The proposal, submitted on December 1, suggests acquiring Macy’s stock at $21 per share, reflecting a 32% premium compared to the previous day’s closing value.

Bid to Counter Online Competition

Macy’s, facing stiff competition from digital retailers that has significantly affected its market value, is now under consideration for a buyout. The investor group, already holding a substantial position in Macy’s through Arkhouse-managed funds, asserts that the retailer is undervalued in public markets.

The offer has been discussed with Macy’s, and the board has convened to evaluate the proposal. However, the retailer’s stance on the offer remains unclear. The investor group is open to increasing its bid, contingent on successful due diligence. To support this, an investment bank has provided a letter affirming the group’s capacity to secure the necessary financing for the deal.

Macy’s Transformation and Cultural Significance

Macy’s, operating nearly 500 department stores along with subsidiaries like Bloomingdale’s, has witnessed a decline in its stock value, influenced by changing retail landscapes. Despite its reduced size, Macy’s cultural significance endures, highlighted by events like the Macy’s Thanksgiving Day Parade and elaborate holiday season window displays in its New York City stores.

The department store giant, which acquired Bluemercury in 2015, reported a profit of about $1.2 billion on $24.4 billion in revenue in the last fiscal year. However, this represents a slight decrease from the previous year’s profit of $1.4 billion on $24.5 billion in revenue. In 2014, Macy’s recorded over $28 billion in sales.

A History of Turmoil and Turnaround Efforts

Macy’s, a result of decades-long acquisitions across the U.S., has been a previous target for takeovers, including an unsuccessful approach by Canada’s Hudson’s Bay Co. in 2017. The company also explored splitting its e-commerce operations from its stores in 2021 but ultimately chose not to pursue this path.

The department store chain has faced shareholder activism, notably regarding its real estate assets. Past attempts by Starboard Value and Jana Partners to influence Macy’s strategy focused on real estate, including its renowned Herald Square location in New York City.

Sector Challenges and Turnaround Initiatives

The department store sector has grappled with consolidation and bankruptcy waves in recent years, exemplified by JCPenney, Neiman Marcus, and Lord & Taylor. Macy’s itself has undergone a turnaround led by CEO Jeff Gennette, with efforts involving store closures, new in-house brands, and supply chain modernization.

With Gennette set to retire next year, Tony Spring, head of Bloomingdale’s, is slated to take over leadership. The proposed buyout by Arkhouse Management and Brigade Capital Management introduces a new chapter for Macy’s, potentially reshaping its trajectory in response to the evolving retail landscape.

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