Over the last weekend, struggling retailer Macy’s announced a verdict on an aggressive bid from investment firms Arkhouse Management and Brigade Capital Management to take over the company and make Macy’s, publicly traded since the early ’90s, into a private company.
The two companies offered a combined $5.8 billion to buy Macy’s, but on Sunday, Macy’s board rejected the offer. It cited both financial concerns and worries that Arkhouse and Brigade don’t have the necessary experience and knowledge to successfully operate a retail company.
Both Macy’s and its prospective buyers declined to answer questions about the proposed deal, but offered statements explaining their reasoning.
“The Macy’s, Inc. Board of Directors and management team have a proven track record of evaluating a broad range of options to enhance shareholder value. Following careful consideration and efforts to gather additional information from Arkhouse and Brigade, the Board determined that Arkhouse and Brigade’s proposal is not actionable and that it fails to provide compelling value to Macy’s, Inc. shareholders,” said Jeff Gennette, Macy’s chairman and CEO, in the statement. “We continue to be open to opportunities that are in the best interests of the Company and all of our shareholders.”
But it’s clear that Macy’s is in need of change. The company has lost 73% of its share price since a peak in 2015. At the same time, it’s closed hundreds of stores and its annual sales are $3 billion less than they were eight years ago. That’s thanks, in part, to continued competition from major e-commerce players like Amazon which have begun to eat into its business.
At the National Retail Federation conference in Manhattan earlier this month, before the announcement that Macy’s would reject Arkhouse and Brigade’s bid, Macy’s chief operating officer Adrian Mitchell laid out some of the ways Macy’s is using new technologies to revitalize the brand and gain an edge on competitors.
“In retail, if you stand still, you’re falling behind,” Mitchell said. “We have to invest in new technologies like AI and learn from them. There are so many things in business that are better done by a computer, like allocating inventory to stores and moving products across the country. We’re testing how to automate some of that right now.”
While Macy’s sales have continued to drop, some of its cost-cutting measures helped improve profits toward the end of last year. Its third-quarter earnings, released in November, beat Wall Street estimates and gave Macy’s stock a 7% boost that it sorely needed.
But Arkhouse managing partners Gavriel Kahane and Jonathon Blackwell said, in a joint statement, that they believe Macy’s needs to do more to return value to its shareholders, including Arkhouse Management. And they haven’t given up hope on the possibility of a takeover.
The statement read: “Macy’s advisors confirmed that they had no further questions regarding our financing. We urge Macy’s to engage expeditiously in good faith discussions with the goal of achieving a mutually agreeable transaction that can provide superior value to stockholders. We are highly motivated to consummate an acquisition of Macy’s and are prepared to pursue all necessary steps, including direct engagement with stockholders, to achieve this goal.”
