Arkhouse and Brigade have submitted an increased "all-cash" proposal to acquire Macy's after their initial $21 per share offer in December was rejected due to allegedly failing to "provide evidence of a viable financing plan".
GlobalData’s retail managing director analyst Neil Saunders told Just Style exclusively the increased bid is a sign that Arkhouse and Brigade do not intend to give up on buying Macy’s.
He shared: "They are serious and they want Macy’s to engage with them. The latest offer puts a lot more pressure on Macy’s board and they will have to decide as to whether to take the offer seriously or not."
In an official statement Macy's said: "The Macy’s, Inc. board will carefully review and evaluate the latest proposal consistent with the board’s fiduciary duties and in consultation with its financial and legal advisors. The Macy’s, Inc. board has a proven track record of evaluating a broad range of options to create shareholder value, is open-minded about the best path to achieve this objective and is committed to continuing to take actions that it believes are in the best interests of the company and all Macy’s, Inc. shareholders."
What does Arkhouse and Brigade's revised Macy's buyout proposal entail?
The revised offer by Arkhouse and Brigade is said to represent:
- A 51.3% premium to Macy’s unaffected share price on 30 November 2023, the day prior to Arkhouse and Brigade submitting their original proposal on 1 December 2023
- A 33.3% premium to where Macy’s shares closed on 1 March 2024
- An increase of 14.3% from Arkhouse and Brigade’s previous offer of $21 per share that was submitted to Macy's in December 2023.
Gavriel Kahane and Jonathon Blackwell from Arkhouse Managing Partners, said the investment firm is steadfast in its commitment to execute this transaction despite the "delay tactics" adopted by Macy's board of directors and its continued "refusal to engage" with Arkhouse's credible buyer group.
The duo added: "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. This would provide Macy’s stockholders with significant value and immediate liquidity."
What does the new offer mean for Macy's?
Macy’s explained that it does not intend to comment further on Arkhouse and Brigade’s "revised, unsolicited non-binding proposal until the board has completed its review". It also noted that Macy’s' shareholders do not need to take any action at this time.
However, Saunders believes the board's general preference will be to reject the deal as they won’t think that Arkhouse and Brigade have the best interests of the company at heart.
However, he added: "They also have a duty to consider what represents the best value for investors".
Saunders pointed out that for investors there is a ‘bird in the hand is worth two in the bush’ type dilemma.
He continued: "There is an offer on the table, which is at a premium to the share price, but there is also the prospect of a turnaround under Tony Spring’s new plan. They need to decide what they think presents them with the best prospects of generating a return."
Kahane and Blackwell are adamant that Macy's restructuring plan has failed to inspire investors. They also pointed out the company's fall in sales for both its fourth quarter and year-end results, give them further confidence in the long-term prospects of Macy's if redirected as a "private company."
They stated: "The notion that the plan we are proposing is not actionable is simply not true. We have tried repeatedly to address the concerns raised by the company. We clarified the 50% equity contribution we laid out three months ago and disclosed our partnership with two highly regarded investors – Fortress and OneIM. With the help of our advisors, we have identified large global institutional financing sources for each debt component of the transaction with strong interest in finalising commitments during a customary diligence process. These sources represent 100% of the capital required to buy the shares in Macy’s we do not already own at our proposed price of $24.00 per share in cash."
The duo also highlighted that Arkhouse remains open to increasing the purchase price further subject to the customary due diligence.
Arkhouse is urging Macy's to participate in "good faith" negotiations, aiming for a transaction that delivers "significant value for all stockholders."
Kahane and Blackwell concluded: "We sincerely hope the members of the board are not so entrenched in their views about the future direction of the company that they would ignore their fiduciary duties to explore a potential transaction with a credible buyer. We remain ready to proceed expeditiously with our due diligence toward a mutually agreeable transaction to acquire Macy’s at a substantial premium in cash."
