Macy's (M +12%) saw significant gains today after Arkhouse Management and Brigade Capital Management raised their bid to take the department store private. The offer was increased to $24.80 per share from $24.00 per share, adding roughly $300 million to the deal. This values Macy's at just under $7 billion, a nearly 40% premium to its previous closing price.
- Despite the increased offer, Macy's stock is still trading below the updated purchase price, indicating investor skepticism about the deal's acceptance. This isn't the first time the investor group has raised their offer; in March, they increased their bid from $21.00 per share, but Macy's opted for a restructuring plan instead. The plan aims to monetize up to $750 million of assets by 2026 and achieve annual savings of $235 million.
- CEO Tony Spring, who took the helm in February, is guiding Macy's through a challenging period marked by reduced discretionary spending and stiff competition from e-commerce. Spring, who previously led Bloomingdale's and Bluemercury, may prefer a turnaround plan, given his track record of success with these brands.
- Meanwhile, Macy's competitors are making moves to strengthen their positions. The parent company of Saks Fifth Avenue has agreed to acquire Neiman Marcus Group for $2.65 billion, bolstering its luxury retail segment. Nordstrom (JWN, Financial) has also received several takeover offers, which could prompt Macy's to act swiftly, especially in light of the increased bid.
- Macy's faces significant competitive and economic challenges. The company's FY25 comp guidance ranges from -1.0% to +1.5%, with the low end assuming no improvement in demand and ongoing competitive pressures. The high end anticipates internal improvements driving more store traffic. Another weak quarter could increase shareholder pressure to accept a takeover offer.
Despite the attractive premium, the market remains doubtful about Macy's accepting the takeover bid. If Macy's continues to reject the offer in favor of its turnaround plan, investor patience may wear thin, potentially leading to lower future bids.
