Macy’s, the iconic American department store, has rejected a $5.8 billion takeover offer from investment firms Arkhouse Management and Brigade Capital Management. The decision was made due to the lack of a viable financing plan provided by the firms. The offer was for $21 per share for the stock that Arkhouse and Brigade don’t already own.
Last week, Macy’s Inc. announced that it would be laying off approximately 2,350 employees, which accounts for about 3.5% of its total headcount. The company also revealed plans to close five of its locations. These recent developments indicate that Macy’s is undergoing significant changes in an effort to adapt to the evolving retail landscape.
The board of Macy’s thoroughly reviewed the proposal put forth by Arkhouse and Brigade and expressed concerns not only about the financing plan but also about the lack of compelling value in the offer. Jeff Gennette, the outgoing chairman and CEO of Macy’s, stated, “Following careful consideration and efforts to gather additional information from Arkhouse and Brigade, the board determined that Arkhouse and Brigade’s proposal is not actionable and that it fails to provide compelling value to Macy’s Inc. shareholders.”
Tony Spring is set to take over as the president and CEO of Macy’s next month. Neil Saunders, managing director of GlobalData, believes that Macy’s management is not interested in pursuing a deal with Arkhouse and Brigade. According to Saunders, they view the real estate-focused approach of the investment firms as detrimental to the business in the long run. He explains, “Monetizing real estate with no focus on revitalizing the retailer and bolstering trading would produce short-term gains but severely weaken long-term prospects.”
However, Saunders also acknowledges that Macy’s itself has struggled to add value to its stores and neglected retail fundamentals for years. This raises concerns for Macy’s shareholders who are now faced with a difficult decision. Saunders states, “Unless other bidders step forward, Macy’s shareholders are caught between the devil and the deep blue sea. They can back existing management on the continued promise of jam tomorrow, or cash out to an investor whose plans are unknown and could well hasten the demise of one of retail’s most iconic names.”
Despite the rejection of the takeover offer, shares of Macy’s Inc. rose nearly 2% before the market opened on Monday. This indicates that investors may still have confidence in the company’s ability to navigate the challenges it currently faces.
Macy’s, headquartered in New York City, has long been a symbol of American retail. Its decision to reject the takeover offer highlights the company’s determination to find opportunities that are in the best interests of both the company and its shareholders. As Tony Spring prepares to take the helm as president and CEO, all eyes will be on Macy’s to see how it continues to adapt and evolve in an ever-changing retail landscape.