Macy’s Inc. (NYSE: M) announced it has ended acquisition discussions with the activist investors Arkhouse Management Co. LP and Brigade Capital Management LP, citing a failure by the would-be suitors to offer “an actionable proposal with certainty of financing at a compelling value.”
The retailer was in talks with Arkhouse and Brigade after they made inquiries last December regarding a possible acquisition. In March, Macy’s entered into a confidentiality agreement with Arkhouse and Brigade to facilitate a due diligence process, given they had increased their proposal to $24.00 per share – up from the initial $21.00 proposal. In a press statement, Macy’s said it “expended hundreds of hours addressing Arkhouse and Brigade’s extensive diligence requests, facilitating diligence meetings with multiple members of the Company’s senior management as well as its financial and real estate advisors and providing thousands of documents with a level of detail that went well beyond what is customarily required to obtain financing for a public company acquisition, such as providing complete store-by-store P&L’s and full-form leases for each Macy’s, Bloomingdale’s and Bluemercury location. The Company also permitted Arkhouse and Brigade to contact – and share confidential information with – over a dozen credible financing sources.”
Macy’s gave Arkhouse and Brigade a June 25 deadline to provide “the best purchase price per share that Arkhouse and Brigade were prepared to pay” for the acquisition, along with “fully negotiated commitment papers for all the debt and equity needed to finance the revised proposal, subject only to the negotiation of definitive documentation and customary confirmatory due diligence.” Macy’s stated that its requests were not met, but that the companies offered a “check in” letter proposing an acquisition at $24.80 per share in cash accompanied by financing papers that the Macy’s board deemed as insufficient.
“As the board has consistently demonstrated throughout this process, we are open-minded to exploring all paths to enhancing shareholder value,” said Paul Varga, lead independent director at Macy’s. “At this time, after careful review, we have concluded that Arkhouse and Brigade’s proposal lacks certainty of financing and does not deliver compelling value, notwithstanding the significant time, resources, and information shared during this process.”
Macy’s added that it would shift its focus to a strategy dubbed “A Bold New Chapter,” which would take on a triple-pronged initiative to strengthen the brand name, accelerate luxury retailing growth and upgrading its end-to-end operations. Chairman and CEO Tony Spring declared, “While it remains early days, we are pleased that our initiatives have gained traction, reinforcing our belief that the Company can return to sustainable, profitable growth, accelerate free cash flow generation and unlock shareholder value.”
If the Macy’s acquisition talks succeeded, this would have marked the second major department store acquisition of the month – two weeks ago, HBC, the parent company of Saks Fifth Avenue, announced its $2.65 billion acquisition of Neiman Marcus Group (NMG), the parent company of Neiman Marcus and Bergdorf Goodman.
Photo by Mike Mozart / Flickr Creative Commons
