Department store chain Macy’s has terminated months-long discussions regarding a potential takeover after the board concluded that the proposal lacks certainty of financing and compelling value.
The board of directors said it has engaged in good faith with the suitors – Arkhouse Management and Brigade Capital Management – for more than seven months. The investor group eventually failed to provide a “definitive, fully financed and actionable proposal”.
The bidders first offered to acquire Macy’s shares they do not own for $21 apiece in December last year. The amount later increased to $24 per share in March and $24.80 per share in June, with the latest offer equivalent to $6.9 billion. All of the offers fell in the range which the Macy’s board deemed as “not compelling”.
Neil Saunders, MD of GlobalData, said the decision by the Macy’s board is to be welcomed, as neither of the suitors brought any long-term value to the table. In addition, their proposals would have significantly weakened Macy’s and hampered its ability to survive as a retail operation.
“Macy’s has played a good game in patiently furnishing the activist investors with information and allowing their nominees to take some seats on the board.
“Macy’s is also right to terminate dealings that were not proving to be fruitful or serious in terms of financing,” Saunders continued.
Such a decision shows the retailer has a much clearer sense of vision and purpose in working to turn the business around and add value for investors, the analyst said.
“Arkhouse and Brigade were never part of that long-term vision and the distraction of a sideshow they created must now end,” he concluded.
After ending the takeover talks, Macy’s said it will turn its complete focus to enhancing value for shareholders through the company’s standalone operating plan.
Through the “A Bold New Chapter’ strategy, the company is strengthening the Macy’s nameplate, accelerating luxury growth and simplifying and modernizing end-to-end operations. Early signs of improvements have been recorded and additional detail will be shared in the second-quarter earnings report.
