A Macy’s store is seen at Herald Square on December 11, 2023 in New York City.
Michael M. Santiago | Getty Images
Macy’s on Sunday rejected Arkhouse Management and partner Brigade Capital Management’s $5.8 billion proposal to take the department store operator private, citing concerns over deal financing and valuation.
Arkhouse Management, a real-estate-focused investing firm, and Brigade Capital Management, a global asset manager, submitted a proposal to acquire the shares of Macy’s they don’t already own for $21 a share, Arkhouse confirmed earlier on Sunday.
The investor group sees “the potential for a meaningful increase to the original proposal if we are granted access to the necessary due diligence,” Arkhouse said in a statement.
Macy’s rejected the overture.
“The Board has determined not to enter into a non-disclosure agreement or provide any due diligence information to Arkhouse and Brigade,” Macy’s said in a statement, citing “a lack of compelling value” in the proposal.
Macy’s also said that information furnished by Arkhouse and Brigade “failed to address the Board’s concerns regarding Arkhouse and Brigade’s ability to finance their proposed transaction.”
Investment bankers and analysts last month said that Arkhouse and Brigade were unlikely to clinch a deal for Macy’s, but they could be successful in getting the company to unlock more value.
The Arkhouse and Brigade Capital Management-led investor group has a significant stake in Macy’s through Arkhouse-managed funds, Arkhouse said.
Arkhouse said that investment bank Jefferies, which is acting as the buyout group’s financial adviser, “has provided a highly confident letter supporting our ability to raise the necessary funds for the transaction.”
Macy’s said it had concerns with the uncommitted financing that had numerous non-standard preconditions.
The investment firms’ bid has spotlighted how undervalued Macy’s is relative to its real estate, which is projected by analysts to be worth between $7.5 billion to $11.6 billion.
Macy’s owned 316 of its 722 total stores as of the end of January, according to its most recent annual report.
Macy’s last week said it is cutting 2,350 jobs and closing five stores at it aims to streamline operations.
Like other legacy department stores, Macy’s has struggled to compete against younger, online competitors with much smaller brick-and-mortar footprints.
