Dive Brief:
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Macy’s on Tuesday took an opportunity to further rebuff Arkhouse Management, even as it acknowledged that the financial firm has nominated nine people to its board, setting up a proxy fight. About a month ago the department store rejected a $5.8 billion takeover offer from Arkhouse and Brigade Capital.
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On Tuesday, Macy’s defended its board as “diverse, experienced and engaged,” reiterated that the firms had failed to address the board’s concerns about their takeover financing, and slammed Arkhouse for “claiming inaccurately that they had responded to any outstanding issues.”
- In lieu of providing requested information about its potential financing, Arkhouse on Feb. 11 asked Macy’s to extend its director nomination window by 10 days, per Macy’s press release. Arkhouse didn’t immediately respond to a request for comment, and Brigade declined to comment.
Dive Insight:
Macy’s CEO Tony Spring officially took the top job a couple of weeks ago, and the plan is for him to also take over as board chair from outgoing CEO Jeff Gennette at the retailer’s yet-to-be-scheduled annual meeting.
Now he faces a battle for control of the board.
“While there is no guarantee that Arkhouse’s nominations to Macy’s board will be accepted by investors, the move puts further pressure on Macy’s management to set out a clearer vision for the company,” GlobalData Managing Director Neil Saunders said in emailed comments. “In theory this is something new CEO, Tony Spring, should be working on – but it is now a matter of urgency that he provides a compelling story about how he intends to grow Macy’s.”
On Tuesday, Macy’s lamented the whole process, which launched when Arkhouse first offered its bid in December. The move is widely seen as an attempt to capitalize on Macy’s real estate holdings, a familiar scenario that over the years has pushed the likes of Kohl’s, Sears and Macy’s itself, among others, to take action. In this case, investors may be tempted by the idea, given Macy’s persistent weakness as a retailer, according to Saunders.
To some extent the retailer has itself to blame, he also said.
“In our view, Macy’s is right to be concerned about Arkhouse’s intentions, but it did itself no favors by effectively dismissing the bid out of hand without permitting due diligence,” he said.
Macy’s took until January to formally reject the offer, saying then that “the non-binding proposal does not constitute a basis to enter into a non-disclosure agreement or provide any due diligence information to Arkhouse and Brigade.” On Tuesday, Macy’s once again stated that its board had carefully reviewed the Arkhouse-Brigade offer with the help of legal, financial and real estate advisers. The board and its advisers raised concerns about the financing plan, and found the investment firms’ response and their supplemental information lacking.
“Ultimately, the Board determined that the proposal was not actionable and lacked compelling value,” Macy’s said on Tuesday.
“Arkhouse and Brigade have yet to provide any financing details that would enhance the actionability of their proposal despite multiple opportunities to do so, and instead of attempting a constructive dialogue, Arkhouse has chosen to launch a proxy contest,” Macy’s also said.
Despite its resistance to Arkhouse’s overtures, Macy’s will be forced to take up the nominations and said its nominating and corporate governance committee would evaluate the candidates.
“Arkhouse’s decision to launch a proxy fight for Macy’s is a sign that the investment firm has no intention of quietly accepting Macy’s rejection of its initial offer,” Saunders said.
Macy’s Inc. runs flagship Macy’s, Bloomingdale’s, which Spring helmed for nearly 40 years, as well as off-price Backstage and beauty retailer Bluemercury.
