The Macy’s logo is seen at the Macy’s store in Herald Square in New York City on January 19, 2024.
Michael M. Santiago | Getty Images News | Getty Images
Supermarket Macy’s said on Monday its board had unanimously decided to end negotiations with the activist group that had sought to take the retailer private for about $6.9 billion, saying in a statement that questions over the financing and premium were insurmountable.
“We have concluded that Arkhouse and Brigade’s proposal lacks certainty of financing and does not provide compelling value,” Macy’s chief independent officer Paul Varga said in a press release.
Arkhouse and Brigade had been trying to buy the famous retailer for months. Earlier this month, the bidders raised their offer to $24.80 a share, the latest in a series of price hikes since they first launched their takeover efforts last year.
Macy’s said the company had gone “beyond what is typically required” in a due diligence period, providing the bidder group with store-by-store profit and loss and rent information for each location. The company also noted that Arkhouse and Brigade were allowed to share that confidential information with more than a dozen “reliable funding sources.”
Arkhouse, after its initial efforts were rebuffed, said earlier this year that it intended to wage a proxy fight for control of Macy’s. The two sides were able to reach an agreement in April, adding two independent directors to the Macy’s board.
Arkhouse did not immediately respond to CNBC’s request for comment. Shares of Macy’s fell roughly 14% in early trading Monday.
Macy’s is in the midst of a turnaround effort led by CEO Tony Spring, who stepped into the top job in February. The department store operator announced earlier this year that it would close about 150 of its namesake stores and open new locations of Bloomingdale’s and Bluemercury, its two strongest-performing brands. It’s also opening smaller Macy’s locations in bustling suburban malls.
But the department store operator’s efforts to boost sales have been hampered by high inflation as consumers became more selective about spending on discretionary items. Macy’s has had to fight to stay relevant, too, as younger shoppers turn to online players like Shein, department stores like The aim and off-price chains such as TJ Maxx instead of supermarkets.
For the fiscal year, Macy’s expects net sales to be between $22.3 billion and $22.9 billion, which would be down from $23.09 billion in 2023. It expects comparable sales, which strip out the effect of store openings and closings, to range from a decline of about 1% to a gain of 1.5% on a licensed-owned basis and including market sales from third parties.
In an earnings call in late May, Spring said Macy’s is in the “early stages” of revitalizing its name stores. However, he pointed to better sales results in the first 50 stores where Macy’s had invested in more staff, sharper merchandise displays and special events.
Before Monday’s losses, Macy’s shares had fallen about 5% so far in 2024 for a market value of roughly $5 billion, trailing the S&P 500’s roughly 18% gain over the same period.
Arkhouse is a renowned real estate investment firm led by Gavriel Kahane and Jonathon Blackwell. While not a conventional activist investment firm, it has made a handful of unsolicited offers for REITs over the past few years. Brigade Capital Management focuses on retail companies and has previously invested in names like Sears and Neiman Marcus.
Together, the bidding group sought to unlock what it saw as value trapped within Macy’s real estate holdings while simultaneously overhauling the company’s operations. Other department store names have been targets of activists in the recent past for similar reasons. In 2022, the activist fund Macellum called Kohl’s to sell yourself.