Macy’s investors plot $5.8bn buyout amid decline of the department store

In This Article:

Macy’s flagship Herald Square site in New York valued at $3bn
Macy’s flagship Herald Square site in New York is valued at $3bn - Bing Guan/Bloomberg

Two Macy’s investors are plotting a $5.8bn buyout of the department store chain as it grapples with competition from online rivals.

Arkhouse Management and Brigade Capital Management have reportedly submitted an offer to buy Macy’s shares that they do not already own.

Their offer of $21 per share represented a 32pc premium when made on December 1, valuing the company at around $5.8bn. Shares jumped as much as 20pc when markets opened on Monday to just under $21.

However, this remains well below the peak of almost $70 a share that Macy’s traded at in 2015 before the emergence of online giants such as Amazon hammered sales.

The two investors already have a significant stake in Macy’s and have discussed the buyout proposal with management.

Talks subsequently prompted a board meeting to consider the offer, although it is not yet clear whether the directors support the deal.

Arkhouse and Brigade believe Macy’s is undervalued on public markets and have indicated a willingness to increase their offer subject to due diligence, according to the Wall Street Journal, which first reported the takeover bid.

It is thought the investors are attracted by Macy’s large real estate portfolio.

The group owns nearly 500 department stores under the Macy’s brand name, as well as more than 30 Bloomingdale’s sites.

In 2015, Macy’s bought cosmetics and skincare chain Bluemercury, which added around 160 shops to its portfolio.

Analysts at JP Morgan estimate the company’s real estate portfolio alone is worth about $8.5bn, or $31 per share, with its flagship Herald Square site in New York valued at $3bn.

Macy’s posted a profit of around $1.2bn in its last financial year from revenues of $24.4bn. That was slightly down from 2021, while sales have almost halved since 2014.

Despite this drop-off, Macy’s still holds huge cultural significance globally despite the wider decline for department stores.

Founded in 1858, the group has grown steadily through acquisitions and now has more than 90,000 employees.

It is best known for its Thanksgiving Day Parade in New York, which has taken place annually since 1924, as well as its sponsorship of the city’s Fourth of July fireworks display.

Macy's Thanksgiving Day Parade has taken place every year since 1924
Macy's Thanksgiving Day Parade has taken place every year since 1924. Pictured: The 2023 parade - SARAH YENESEL/Shutterstock

Macy’s and Bloomingdale’s stores are also known for their extravagant Christmas window displays.

Macy’s was previously approached about a potential takeover by Hudson’s Bay, the Canadian group behind Saks Fifth Avenue, in 2017. However, a deal never materialised.

The company has also been targeted by activist investors including Starboard Value, which pushed the company to spin off its real estate assets.