A group of investors has made a $5.8 billion bid to buy Macy's in a bid to take the famous department store chain private after stiff competition from online rivals drove its value down.

Arkhouse Management, an investment firm focused on real estate, and Brigade Capital Management, a global asset manager, on Dec. 1 presented a proposal to acquire Macy's shares they don't already own for $21 a share, people familiar said. with the subject. .

This represented a premium of about 32% to where the shares closed the previous day. They increased this month and closed Friday for $17.39. That's still a far cry from where Macy's shares were trading in 2015 — as high as $70 a share — before competition from nimbler digital retailers hurt the business and those of other longtime industry leaders.

The group already has a large position in Macy's through funds managed by Arkhouse. He discussed the proposal with Macy's, whose board later met to discuss the offer. It's unclear how the retailer views the proposal.

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Macy's is reportedly the target of a group of investors seeking to take the retailer private. (Bridget Bennett/Bloomberg via Getty Images/Getty Images)

The investor group, which believes Macy's is undervalued in the public markets, indicated it would be willing to increase its offer, subject to due diligence. An investment bank provided a letter supporting the group's ability to obtain the financing needed to complete the deal.

Clock Security Last To change To change %
M MACY'S INC. 19.05 -1.73 -8.33%

Macy's operates about 500 department stores under its namesake banner. It also owns Bloomingdale's, a high-end department store chain with more than 30 stores and a number of discount and smaller-format stores under both banners.

In 2015, Macy's acquired the beauty and skin care chain Bluemercury, which now has nearly 160 stores.

Macy's generated about $1.2 billion in profit and $24.4 billion in revenue in the last fiscal year. This represented a slight decrease from the $1.4 billion in profit on $24.5 billion in revenue in 2021. In 2014, it recorded more than $28 billion in sales.

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Macys CEO Jeff Gennette

Macy's CEO Jeff Gennette is set to retire next year and will be succeeded by Bloomingdale's chief Tony Spring. (Ismail Ferdous/Bloomberg via Getty Images/Getty Images)

Its cultural significance outweighs its small size, due to the annual Macy's Thanksgiving Day Parade and the extravagant displays at its New York City stores during the holiday season.

Macy's, the culmination of decades of devouring small U.S. department store chains, has been a takeover target before. Canada's Hudson's Bay Co. approached the company about a deal in 2017, to no avail. More recently, in 2021, Macy's considered separating its e-commerce operations from its stores, but ended up opting against such a measure.

Macy's has also been the target of shareholder activists, with particular attention to the company's real estate sector. Starboard Value built up a stake in 2015 and pressured the company to spin off its real estate assets, including its famous Herald Square location in New York City. Jana Partners was also in Macy's shares in 2021 when it pushed for an e-commerce spinoff.

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Macys Turkey Float Thanksgiving Parade

The Macys Turkey Float before the 96th Macys Thanksgiving Day Parade in New York City on November 23, 2022. (TIMOTHY A. CLARY/AFP via Getty Images/Getty Images)

The company has been undergoing a turnaround effort led by Chief Executive Jeff Gennette, who is expected to retire next year and be succeeded by Tony Spring, president of Bloomingdale's. The effort involved closing hundreds of underperforming locations, opening smaller format stores, launching new private brands and modernizing the company's supply chain.

The department store industry has gone through waves of consolidation and bankruptcy in recent years. In 2020 alone, JCPenney, Neiman Marcus and Lord & Taylor filed for bankruptcy, only to later emerge as smaller or digital-only players. More recently, Saks – owned by Hudson's Bay – has been trying to acquire Neiman Marcus.

Arkhouse is an investment company that typically focuses on real estate. In 2021, it was part of a consortium that made an unsolicited bid for Columbia Property Trust, which put the office real estate investment trust into play. A different group of investors ultimately agreed to buy Columbia Property Trust for $2.2 billion.

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Arkhouse's only other public position was in Preferred Apartment Communities, which was sold to Blackstone in a $5.8 billion deal last year.

Brigade Capital Management, which focuses on the consumer and retail sectors, has about $25 billion in assets under management. Some of his investments included JCPenney, Sears, and Neiman Marcus.

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