Dive Brief:
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Arkhouse Management, in partnership with Brigade Capital Management, on Sunday boosted their bid to acquire Macy’s by 14.3%, or about $800 million, to $24 per share and disclosed more financial detail. In January Macy’s rebuffed the firms’ $5.8 billion takeover offer.
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Arkhouse revealed that Fortress Investment Group and One Investment Management US are equity capital partners in the proposed deal. Macy’s previously said it wouldn’t engage further with the suitors, citing insufficient details about their financing.
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Also on Sunday, Macy’s acknowledged the latest offer to buy all shares, which amounts to $6.6 billion, saying it “will carefully review and evaluate the latest proposal consistent with the Board’s fiduciary duties and in consultation with its financial and legal advisors” and declining to comment further.
Dive Insight:
From the get-go, Arkhouse Management has said it might be willing to up its offer. It took just a little over a month to do so, and apparently without the financial information the firms were demanding.
In their release Sunday, Arkhouse Managing Partners Gavriel Kahane and Jonathon Blackwell expressed ongoing frustration with what they called “the delay tactics adopted by Macy’s Board of Directors” but said they “are steadfast in our commitment to execute this transaction.”
That tenacity was also evident in the looming proxy fight ushered in by Arkhouse’s nine board nominations last month. In an interview filed with the Securities and Exchange Commission, Kahane said that Macy’s unwillingness to engage with the firm necessitates an overhaul of the board.
“Obviously, our preference as an interested buyer is that they sell to us, but our expectation of course is that they should run a process to determine what is in the best interest of all shareholders,” he said. “My strongly held view is I think we have a very strong group assembled to buy this company at a very big premium, and I think we stand the chance to win.”
However, the investors are moving forward with a higher bid despite a dearth of data regarding store operations and real estate.
“We don't even know store by store profitability,” Kahane said. “We're guessing at that. We don't know tax basis on the real estate. We don't have any other relevant information on performance that's absolutely critical to crossing our T's and dotting our I's.”
There’s now a new bid on the table nevertheless. The overarching rationale for the proposed takeover is for Macy’s board to “explore strategic alternatives,” and, specifically, to better manage the retailer’s real estate, according to Kahane, who noted that only one current Macy’s director has “any real estate track record.”
“It's a bad idea to own real estate and to try and manage and asset manage and profit from real estate when you're not a real estate investor,” he said.
Macy’s does appear to be moving forward with plans to monetize some of its holdings. Last week the company said it would close 150 underperforming stores within three years, including cash-positive ones, and that decisions will be based on stores’ potential real estate value versus sales growth and profitability.
