Macy’s Rejects Buyout Offer, Bets on Itself

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CNN
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Macy’s management has ended talks with private investors trying to take over the company and will pursue its own turnaround strategy to reshape the chain.

Macy’s board of directors has unanimously decided to end discussions with Arkhouse Management and Brigade Capital Management about investor offers to acquire the chain. Macy’s said Monday that it was uncertain whether investors could finance a deal and that it was not in the best interests of shareholders.

Investors planned to take Macy’s private and consider spinning off its real estate assets or separating its online operations from physical stores.

Investors have been trying to buy Macy’s since December. But Macy’s rejected a previous offer to buy the company at $21 a share in January. In March, investors raised their offer to $24 a share, and Macy’s agreed to begin negotiations on the offer. Now, it’s calling off negotiations.

Macy’s will instead stick to its own strategy, led by new CEO Tony Spring, which includes closing underperforming Macy’s stores and investing in its luxury chains Bloomingdale’s and Bluemercury.

In recent decades, groups of investors such as private equity and hedge funds have aggressively bought up struggling or underperforming retailers, with the stated goal of taking them private, improving their operations and selling them at a profit. But the results have often led to closures, not salvation, for companies such as Sears and Toys “R” Us.

Macy’s decision to end talks with investors will benefit the chain, retail analyst Neil Saunders said in a note to clients Monday.

“Other than seeking to monetize Macy’s real estate assets for short-term gain, neither side delivered long-term value,” he said. “Many of the activist investors’ proposals would have significantly weakened Macy’s and hampered its ability to survive as a retail company.”

Macy’s shares fell about 13% in morning trading Wednesday to $16 a share.

Macy’s and other traditional department stores have struggled as competition from online retailers like Amazon and big box stores like Walmart and Target — which offer shoppers the option to buy groceries as well as clothing and other household items — has left Macy’s with a smaller slice of the retail pie.

Analysts also say Macy’s has underinvested and that cost-cutting measures have hurt customer service in stores.

CNN’s Chris Isidore contributed to this report.