Macy’s Receives $5.8B Take-Private Deal from Investor Group

Arkhouse Management, a real estate investment firm, and Brigade Capital Management, a global asset manager, have made an offer to acquire the stock of legendary department store chain Macy’s Inc. that they do not already own for $5.8 billion, according to the Wall Street Journal.

The investor group submitted a buyout bid on December 1, valuing the takeover deal at $21 per share, a 21% premium to where Macy’s shares closed last Friday.

Macy’s valuation is undervalued in the public markets, according to Arkhouse and Brigade, and the company has signaled a willingness to raise the offer subject to due diligence, according to the WSJ.

The report also stated an investment bank has provided a letter supporting the investor group’s ability to raise the necessary financing to get through the deal.

Macy’s has struggled with dwindling revenues and increased competition from online retailers, making it an attractive acquisition target. The group’s greater appeal, however, may rest in its U.S. real estate portfolio, which was recently valued at roughly $8.5 billion.

Activist investors have already targeted Macy’s real estate holdings, with Starboard Value’s Jeff Smith advocating in 2017 for separating the group’s retail operations from its real estate assets.

Macy’s would acquire capital by selling a minority stake in the joint ventures, and it could subsequently explore an initial public offering for one or both of them, according to Smith. This would allow it to pay down debt while still making regular dividend payments.

Macy’s operates over 500 stores in the U.S. and has a market capitalization of about $4.77 billion. The company’s shares are down nearly 16% this year.