Macy’s has received a $5.8 billion offer from an investment group to take the iconic department store chain private, a deal that could have more to do with the retailer’s real estate holdings than its actual business.
The bid for the 165-year-old retailer was made Dec. 1 by Arkhouse Management, a real estate-focused investment firm, and Brigade Capital Management, a global asset manager, Wall Street Journal reported Sunday, citing people familiar with the matter.
The investor group already has a large stake in Macy’s through Arkhouse-managed funds and offered to pay $21 per share to buy the Macy’s stock it doesn’t already own, the paper said. reported.
Macy’s stock closed at just over $17 a share. stock Friday, down about 17% for the year. On Monday, shares rose nearly 17% to $20.29 apiece, giving the company a market value of nearly $5.6 billion.
Years of chronic underperformance have weighed on Macy’s stock, making the company a relatively attractive acquisition target. But its value has more to do with real estate than the company’s business, according to retail analyst Neal Saunders.
“Since Macy’s still owns many of its own stores, including some flagship locations, its real estate portfolio is worth at least $6 billion at a conservative estimate,” Saunders, CEO of GlobalData, said in an email. “That’s more than Macy’s current market cap, meaning any savvy investor could snap up Macy’s in a bargain and earn a generous return by cashing in on real estate alone. For a real estate-focused company like Arkhouse, this is a worthwhile bet to take. ”
Arkhouse, Brigade and Macy’s all declined comment.
The retailer, known for its annual Thanksgiving Day Parade in New York City, operates nearly 500 stores nationwide under its own brand and also operates Bloomingdale’s, a more upscale chain with more than 30 locations.
Macy’s reported $1.2 billion in profit on $24.4 billion in revenue in the last fiscal year, down from $1.4 billion in earnings on $24.5 billion in revenue in 2021.
Department stores have struggled amid industry consolidation, with Neiman Marcus and everyone declares bankruptcy in 2020.,
The retailer has been involved in a turnaround effort led by CEO Jeff Gennette, who is retiring in February and will be succeeded by Tony Spring, who now runs Bloomingdale’s.
In Saunders’ view, a takeover of the investment companies could be lucrative for investors, but bodes ill for Macy’s future.
“Management must now make an assessment. Either they show confidence in their future plans and keep Macy’s as a public company, or they let Macy’s go private in a transaction that will likely cause the brand to fade further and faster.”