Just in time for Christmas, private equity groups have tabled a $5.8 billion offer to buy department store chain Macy’s (NYSE:M). M stock is surging on the news.
Arkhouse Management and Brigade Capital Management are valuing the retailer at $21 per share. The stock closed on Dec. 8 at $17. The offer was first reported in The Wall Street Journal.
M stock opened this morning at $20.11 per share, up 16% from its Dec. 8 close. The market capitalization stood at about $5.4 billion.
Happy Ending?
According to The New York Times, Arkhouse and Brigade reportedly made the offer on Dec. 1. It’s partly an effort to profit from the chain’s real estate, including its flagship location at 34th Street.
Macy’s represents the re-brand of a nationwide department store chain called Federated Department Stores in the last century. That’s why it’s still based in Cincinnati. Shares traded as high as $70 in 2015 before e-commerce and big box stores decimated it. Arkhouse and Brigade already have stakes in the company.
The chain still has 500 stores, along with 30 high-end Bloomingdale’s outlets. In recent years, Macy’s has tried to build smaller stores in strip centers under the name Market by Macy’s.
The company remains profitable, earning $1.2 billion in 2022. That prompted a recent strike over Black Friday.
Macy’s claimed a strong third quarter. But profits were just $43 million, 15 cents per share, on revenue of $4.8 billion. All those figures were down from a year earlier.
Merger activity in retailing has picked up this year, according to Axios, with apparel brands in the spotlight. All apparel companies are facing a new crisis with the rise of Chinese fast fashion names Shein and Temu, the latter owned by Pinduoduo (NASDAQ:PDD).
Luxury brands like Capri have been bought up at high prices. Licensing company Authentic has swept up less successful brands.
M Stock: What Happens Next?
Negotiations appear to be far along. A deal could be announced soon. CEO Jeff Gennette says he’s retiring in February.
M stock is up about 18% this morning and about 2% year-to-date.
As of this writing, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
