The Macy's logo is seen at the Macy's store in Herald Square on Jan. 19, 2024 in New York City. Macy's announced it will lay off approximately 2,350 employees, or about 3.5% of its workforce. The company says it will also close five stores as it adapts to the age of online shopping. (Photo by Michael M. Santiago/Getty Images)
Michael M. Santiago | Getty Images News | Getty Images
Storage Department Maisie Amazon Web Services Inc. said Monday its board of directors unanimously decided to end negotiations with an activist group that was looking to take the retailer private for about $6.9 billion, saying in a statement that questions about financing and the premium were unresolvable.
“We have concluded that Arkhouse and Brigade’s proposal lacks certainty of funding and does not offer compelling value,” Paul Varga, Macy’s lead independent director, said in a press release.
Arkhouse and Brigade have been trying to buy the popular retailer for months. Earlier this month, bidders raised their offer to $24.80 per share, the latest in a series of price increases since they launched their first takeover effort last year.
Macy’s said the company went “beyond what is normally required” during the due diligence period by providing the bidder with information on the profit and loss of each store and the leases for each location. The company also noted that Arkhouse and Brigade were allowed to share this confidential information with more than a dozen “trusted sources of financing.”
After its initial attempts were rebuffed, Arkhouse announced earlier this year that it would launch a proxy battle for control of Macy’s. The two sides reached a settlement in April, adding two independent directors to Macy’s board.
Arkhouse did not immediately respond to a request for comment. Macy’s shares fell about 14% in early trading Monday.
Macy’s is currently undergoing a restructuring effort led by Chief Executive Tony Spring, who took over the top job in February. The department store operator announced earlier this year that it would close about 150 of its own-name stores and open new locations for Bloomingdale’s and Blue Mercury, the two brands that have delivered stronger results. It will also open smaller Macy’s locations in crowded suburban malls.
But the traditional department store operator’s efforts to boost sales have been hampered by high inflation, as consumers become more selective about spending on discretionary goods. Macy’s has also had to struggle to stay relevant, as younger shoppers turn to online players like Shein and big-box stores like Goal And discount chains like TJ Max Instead of department stores.
For the fiscal year, Macy's expects net sales to be between $22.3 billion and $22.9 billion, down from $23.09 billion in 2023. It expects comparable sales, which exclude the impact of store openings and closings, to range from a decline of about 1% to a gain of 1.5% on an equity plus licensing basis including third-party marketplace sales.
In an earnings call in late May, Spring said Macy's was in the “early stages” of reviving its eponymous stores. However, he pointed to better sales results at the first 50 stores as Macy's invested in more staff, more stylish merchandise displays and special events.
Before Monday’s losses, Macy’s shares had fallen about 5% so far in 2024 at a market value of about $5 billion, lagging the S&P 500’s gain of about 18% over the same period.
Arkhouse is a well-known real estate investment firm led by Gavriel Kahan and Jonathan Blackwell. While not a traditional activist investor, it has made a number of unsolicited bids for REITs in the past few years. Brigade Capital Management focuses on retail companies and has previously invested in names like Sears and Neiman Marcus.
Together, the bidding group sought to unlock what it saw as trapped value within Macy’s real estate holdings, while also overhauling the company’s operations. Other department store names have been targets of activists in the recent past for similar reasons: In 2022, activist fund Macellum urged Coles To sell himself.
