Macy’s Shares Leap 13.6% as Arkhouse Boosts Offer to $6.6B
● The investor, working in conjunction with Brigade, previously proposed a $5.8 billion buyout and launched a proxy fight to get Macy’s to engage.
Shares of Macy’s Inc. jumped 13.6 percent to $20.45 on Monday after Arkhouse Management Co. and Brigade Capital Management boosted their offer for the retailer by almost $1 billion — but Wall Street is still taking a cautious stance.
Arkhouse and Brigade sweetened their buyout proposal to $24 a share, up from the $21 price floated on Dec. 1.
That moved the total offer on the department store to $6.6 billion from $5.8 billion, but the trading on Wall Street left the company with a market capitalization of $5.6 billion, below the initial proposal.
Investors are feeling a little better, but waiting to see if the extra money is enough to bring Macy’s to the bargaining table.
Macy’s said its directors “will carefully review and evaluate the latest proposal consistent with the board’s fiduciary duties and in consultation with its financial and legal advisers.”
Arkhouse is known for its real estate savvy and Macy’s is sitting on some valuable properties, including its flagship at Herald Square and a host of other stores. But successfully separating a retailer from its real estate can be difficult and even when it does produce a big financial gain, the process can leave the chain considerably weakened.
So far, Macy’s has kept the would-be buyers at arm’s length, having raised questions about the financing behind the proposal and refusing the suitors access to confidential information that would help them raise the price.
Arkhouse and Brigade are already bringing their cause directly to shareholders with a proxy battle that is set to have the two sides square off at the company’s annual meeting.
But first the pair is trying again to get Macy’s to engage with a higher price and some more details on its financing.
Arkhouse said Fortress Investment Group and One Investment Management U.S. would contribute to the 50 percent equity component of the proposed acquisition.
Gavriel Kahane and Jonathon Blackwell, Arkhouse managing partners, said: “In recent months, Macy’s has introduced two restructurings and a dividend hike. The stock price selloff following these announcements is a strong indication of shareholder concern about maintaining the status quo. We continue to offer the company an attractive alternative solution through a sale of the company at a substantial premium.”
The new price represents a 51.3 percent premium to Macy’s stock price on Nov. 30, the day before Arkhouse and Brigade first made their overture, the investors said.
Macy’s has not been standing still and the company’s new chief executive officer Tony Spring last week laid out plans to close 150 of the company’s namesake stores, cutting the fleet down to about 350 doors in an effort to strengthen the business.
Kahane and Blackwell said, “While the restructuring plan Macy’s unveiled last week failed to inspire investors, the fourth-quarter earnings and year-end results have given us further confidence in the long-term prospects of the company if redirected as a private company.”
The pair said they were open to increasing the purchase price once they are able to get a closer look at Macy’s books and perform its due diligence.
“With the help of our advisers, we have identified large global institutional financing sources for each debt component of the transaction with strong interest in finalizing commitments during a customary diligence process,” they said. “These sources represent 100 percent of the capital required to buy the shares in Macy’s we do not already own at our proposed price of $24 per share in cash.”