Luxury department store chains Saks Fifth Avenue and Neiman Marcus will merge in a long-mulled $2.65 billion, but there is a twist, as Amazon will potentially take a share in the new entity.
The deal will see Hudson’s Bay Co, Saks’ owner, acquire Neiman Marcus, and the acquisition has been approved by the boards of both companies, the Wall Street Journal reported, citing people familiar with the matter. The two companies had been negotiating for months and had explored a combination several times over the years.
The combined company, which will be called Saks Global, would have about $10 billion in annual sales.
Amazon will potentially take a minority stake in this new company, providing it with technology and logistical assistance. Cloud-based software company Salesforce is another minority shareholder.
Marc Metrick, the CEO of Saks’ e-commerce business, will run the combined company, according to the sources.
GlobalData MD Neil Saunders described the merger as a “marriage of convenience”, as both chains have struggled with growth and uncertain prospects. The deal would bring more financial firepower to negotiate with luxury brands, but would not resolve all the issues.
“Even a combined chain would not match the heft and power of the global luxury conglomerates, which would still hold most of the cards,” Saunders explained. “As such, there is a risk that the deal might end up creating an even bigger headache for Saks.”
Amazon taking a stake in the business adds a bit of spice to an otherwise predictable deal, the analyst continued. However, it makes sense because the company has ambitions to play more heavily in the luxury space.
“The real win here would be the ability of Amazon to streamline logistics and e-commerce, giving the new entity an advantage in a market where remote shopping has become more important to shoppers – especially younger ones, which both chains need to do more to attract.”
Although there is no substantial competitive concern, Saunders warned of the possibility that the deal may face the hurdle of the Federal Trade Commission given the situation of recent mergers.
