"We Remain Frustrated": Investors Raise Buyout Bid For Macy's After Board's "Delay Tactics"

Tyler Durden's Photo
by Tyler Durden
Monday, Mar 04, 2024 - 07:00 PM

On Sunday, Arkhouse Management Co. and Brigade Capital Management raised their all-cash bid to purchase Macy's at $24 per share, a 33% premium versus Friday's closing price of $18.01. This comes a little more than a month after the retailer rejected a go-private bid from the group of investors. 

Arkhouse and Brigade disclosed Fortress Investment Group LLC and One Investment Management US as equity partners in the deal to acquire Macy's. 

Arkhouse highlighted how they had revised the deal higher to entice Macy's executives: 

  • A 51.3% premium to Macy's unaffected share price on Nov. 30, 2023, the day prior to Arkhouse and Brigade submitting their original proposal on Dec. 1, 2023;

  • A 33.3% premium to where the Company's shares closed on March 1, 2024; and

  • An increase of 14.3% from Arkhouse and Brigade's previous offer of $21.00 per share that was submitted to the Company on Dec. 1, 2023.

Gavriel Kahane and Jonathon Blackwell of Arkhouse expressed their frustrations with Macy's Board:

"We remain frustrated by the delay tactics adopted by Macy's Board of Directors (the "Board") and its continued refusal to engage with our credible buyer group. Nonetheless, we are steadfast in our commitment to execute this transaction. In recent months, Macy's has introduced two restructurings and a dividend hike. The stock price selloff following these announcements is a strong indication of shareholder concern about maintaining the status quo. We continue to offer the Company an attractive alternative solution through a sale of the Company at a substantial premium. This would provide Macy's stockholders with significant value and immediate liquidity.

While the restructuring plan Macy's unveiled last week failed to inspire investors, the fourth quarter earnings and year-end results have given us further confidence in the long-term prospects of the Company if redirected as a private company. After coordinating with our financing sources, we have increased our offer to $24.00 per share in cash. We remain open to increasing the purchase price further subject to the customary due diligence.

The notion that the plan we are proposing is not actionable is simply not true. We have tried repeatedly to address the concerns raised by the Company. We clarified the 50% equity contribution we laid out three months ago and disclosed our partnership with two highly regarded investors – Fortress and OneIM. With the help of our advisors, we have identified large global institutional financing sources for each debt component of the transaction with strong interest in finalizing commitments during a customary diligence process. These sources represent 100% of the capital required to buy the shares in Macy's we do not already own at our proposed price of $24.00 per share in cash. We have struggled to understand what reservations the Board might have at this point and urge the Company to engage with us in good faith with the goal of reaching a transaction that would unlock significant value for all stockholders.

We sincerely hope the members of the Board are not so entrenched in their views about the future direction of the Company that they would ignore their fiduciary duties to explore a potential transaction with a credible buyer. We remain ready to proceed expeditiously with our due diligence toward a mutually agreeable transaction to acquire Macy's at a substantial premium in cash."

Shares of Macy's jumped more than 17% in premarket trading in New York on the revised deal.

Two weeks ago, Arkhouse nominated nine people for Macy's board of directors, igniting a proxy battle after the department store rejected a go-private bid in mid-January.

Last week, Macy's announced "a bold new chapter" in the department store's future, pivoting from catering to low-tier consumers to more affluent ones. In doing so, it will close 150 stores over the next few years while expanding Bloomingdale's and Bluemercury stores.