Macy's Ditches $5.8 Billion Takeover Bid After Investor Arkhouse Threatens to Take Offer Directly to Shareholders

By Jace Dela Cruz

Jan 22, 2024 12:33 AM EST

Macy's announced Sunday that it had rejected a $5.8 billion offer from Arkhouse Management and partner Brigade Capital Management to take over the retailer.

According to Reuters, the department store giant cited deal financing and valuation concerns, claiming the offer lacked "compelling value."

In a proposal submitted last month, the real-estate-focused investing firm Arkhouse and global asset management firm Brigade offered to acquire all of the remaining Macy's common stock they don't already own for $21 a share.

Macy's Announces Corporate Layoffs And The Closing Of 5 Stores
(Photo : Michael M. Santiago/Getty Images)
NEW YORK, NEW YORK - JANUARY 19: The Macy's company logo is seen at the Macy's store on Herald Square on January 19, 2024 in New York City. Macy's department-store chain announced that they will be laying off roughly 2,350 employees which is about 3.5% of their workforce. The company says that it will also be closing five stores in order to adjust to the online-shopping era.

Macy Rejects Arkhouse, Brigade Offer

Despite the investors seeing the possibility of increasing the initial proposal if they are "granted access to the necessary due diligence," Macy's rejected the offer, saying it was not financially attractive or credible enough to grant such access.

In a statement, Macy's said: "The board has determined not to enter into a non-disclosure agreement or provide any due diligence information to Arkhouse and Brigade."

The department store chain further noted that information provided by the two investment firms "failed to address its board's concerns regarding Arkhouse and Brigade's ability to finance their proposed transaction."

The rejection came after Arkhouse threatened to bring the matter to shareholders if the deal talks with Macy's didn't pick up.

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Arkhouse's Stake in Macy's

In a statement, Arkhouse said they "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."

"We encourage the company to respond to us this week," the investor added. According to Arkhouse, the Arkhouse and Brigade-led investor group holds a significant stake in Macy's through Arkhouse-managed funds.

Arkhouse also said that Jefferies, the investment bank acting as the buyout group's financial adviser, "has provided a highly confident letter supporting our ability to raise the necessary funds for the transaction." However, Macy's raised concerns about the uncommitted financing and said it came with many non-standard preconditions.

People familiar with the matter told Reuters that the department store chain, which has no other unsolicited bidders meeting the company's expectations about a potential deal, expects a successful bidder to show enough committed financing and have a record of pulling off buyouts in the retail sector. 

Reuters reported that this offer has highlighted how undervalued Macy's is relative to its real estate, which analysts project to be worth between $7.5 billion and $11.6 billion.

As of the end of January, Macy's most recent annual report said it owned 316 of its 722 total stores. Last week, the company said it is cutting more than 2,300 jobs and closing at least five stores as it streamlines its operations.

Macy's is currently struggling to compete against online competitors as shoppers' preferences have shifted away from department stores.

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