Investors Raise Macy’s Buyout Bid

An investor group seeking to buy Macy’s is raising its offer by nearly $1 billion after the beleaguered department-store chain rebuffed its prior proposal as too low.

Arkhouse Management, a real estate-focused investing firm, and Brigade Capital Management, a global asset manager, are now offering to acquire the Macy’s stock they don’t already own for $24 per share, or $6.6 billion, people familiar with the matter said.

That is up from the proposal of $21 a share the group submitted on Dec. 1. The new offer represents a roughly 33% premium to where Macy’s shares closed on Friday.

Macy’s management said in January that the prior bid failed to “provide compelling value” to shareholders.

The investors already have a big position in Macy’s through funds managed by Arkhouse, which recently nominated nine candidates to the company’s board ahead of its annual shareholder meeting set for May 17 in an effort to pressure the board to engage.

Macy’s had more than $23 billion in sales last year. It and other major department-store chains have been battered in recent years by stiff competition and shifting shopping patterns, leading to waves of consolidation and bankruptcies in the industry.

In 2020 alone, JCPenney, Neiman Marcus and Lord & Taylor all filed for bankruptcy, to later emerge as smaller or digital-only players. Kohl’s was close to a deal to be sold in 2022, but later backed out. More recently, Saks—owned by Hudson’s Bay—has been trying to scoop up Neiman Marcus.

Legacy retailers such as Macy’s have been burdened by archaic stores and bulky websites, while younger shoppers gravitate to digital-first brands with nimbler operations. Coming out of the pandemic, more consumers are also choosing to head to local shopping centers over suburban malls traditionally anchored by department stores.

This year, Macy’s sees sales falling between about 1% and 4%.

Macy’s is in the midst of a transformation under its new chief executive, Tony Spring, who ascended to the top job Feb. 4 after serving as the company’s president and CEO-elect for nearly a year. Spring previously spent more than three decades with Bloomingdale’s, the higher-end chain of stores owned by Macy’s.

He recently unveiled his vision for modernizing the department-store operator, which includes closing about 150 underperforming Macy’s stores—or about 30% of its total—over the next three years. The focus will now be on upgrading the remaining 350 Macy’s locations and adding Bloomingdale’s shops and Bluemercury beauty stores.

(In January, Macy’s eliminated 13% of its corporate staff and said it would close five stores, ahead of the latest planned cuts.)

Macy’s shares initially jumped on the news late last month, but the stock has since traded back down, closing Friday at $18.01—a far cry from a high of $70 in 2015.

Spring said on a conference call with analysts last week that fiscal 2024 will be a “transition and investment” year. “We are moving swiftly and methodically,” he said.

UBS analyst Jay Sole said in a research note that “We are not yet convinced this new plan will solve challenges,” adding that e-commerce behemoth Amazon and off-price retailers will continue to eat into Macy’s market share.

A takeover is far from a sure thing either. Macy’s has expressed doubts regarding Arkhouse and Brigade’s ability to finance their offer. The company hasn’t offered up any due-diligence information to the investors nor has it agreed to sign a nondisclosure agreement, as they have requested.

Arkhouse and Brigade have lined up investment firms Fortress Investment Group and One Investment Management, run by longtime SoftBank financier Rajeev Misra, to provide cash for the deal.

Arkhouse and Brigade remain open to increasing their bid further if they are able to complete due-diligence. They believe Macy’s recent fourth-quarter and year-end financial results proved the company has the potential for long-term success, but it would be easier to fix up as a private company, out of the public eye.

Arkhouse is an investment firm that typically focuses on the real-estate industry. Brigade, which focuses on the consumer and retail industries, has about $25 billion of assets under management.

Write to Lauren Thomas at [email protected]