Department store chain Macy’s (NYSE:M) stock rose 15% over the weekend after an investor group raised their bid for the company to $6.6 billion. The potential buyers bid $5.8 billion for the company last December but were turned down by the board.
Arkhouse Management and Brigade Capital are now offering $24 per share for the stock. M stock opened this morning at $20.54 per share.
The Arkhouse Brigade
Since the first bid was rejected, Arkhouse has announced it is challenging Macy’s board in a proxy fight. It offered a slate of nine directors with retailing, real estate, or capital markets experience. It then threatened to take its deal directly to shareholders.
Arkhouse’s target seems to be Macy’s real estate portfolio, including its flagship store at 6th Avenue and 34th Street. Its website says Arkhouse “consists of real estate and public equity specialists who have closed over $25 billion of real estate transactions” in the last 18 years. Arkhouse co-founder Gavriel Kahane has already tried to buy two real estate investment trusts (REITs) without success. Analysts believe the 6th Avenue store is worth $1.5 billion by itself.
Brigade has experience in distressed securities, bankruptcy, and reorganization. Its managing partner is Daniel Morgan III. It was one of the best-performing hedge funds, based on absolute returns, in 2017.
At the end of its 2023 fiscal year, Macy’s had about $3 billion in debt and $862 million in cash. The company recently announced it is closing 50 more mall stores this year and will shutter a total of 150.
Macy’s is focusing instead on smaller stores with “curated” product collections. Market by Macy’s is a department store concept located in strip malls. Bloomie’s is based on its high-end Bloomingdale’s chain. Bluemercury is a beauty brand that competes with Ulta Beauty (NASDAQ:ULTA).
M Stock: What Happens Next?
The Macy’s board will now be under pressure to either find a white knight or accept the higher bid. Time is not on their side.
On the date of publication, 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.
