Macy’s Inc. is trying to move on from Arkhouse Management and Brigade Capital Management — and their $5.8 billion offer to buy the chain.
After nearly two months of all the parties keeping mum, Macy’s confirmed that the pair of investors offered to take the company private for $21 a share, while the investors signaled a willingness to potentially increase their offer and a readiness to take their case directly to other shareholders.
The proposed takeover, which first came to light in a Dec. 10 Wall Street Journal report, has now burst out into the open.
At the time, it was seen by bankers and industry executives as a low-ball offer, but one that Macy’s board was compelled to take seriously.
Jeff Gennette, the outgoing chairman and chief executive officer of Macy’s, wrote a letter to Arkhouse and Brigade on behalf of the board, expressing “serious reservations about your ability to finance your non-binding proposal.”
“The board has been advised that your proposed cash equity contribution of only 25 percent of the required capital is well below current market levels for similar transactions, and consequently, your proposed overall leverage is well in excess of what could likely be achieved in today’s marketplace and sustainable for a company in our sector,” Gennette said.
Given the financing concerns, and “the lack of compelling value in your non-binding proposal,” Gennette said Macy’s was declining to enter into a non-disclosure agreement or provide any due diligence information.
In a statement, Genette added: “The Macy’s Inc. board of directors and management team have a proven track record of evaluating a broad range of options to enhance shareholder value. Following careful consideration and efforts to gather additional information from Arkhouse and Brigade, the board determined that Arkhouse and Brigade’s proposal is not actionable and that it fails to provide compelling value to Macy’s Inc. shareholders. We continue to be open to opportunities that are in the best interests of the company and all of our shareholders.”
But the would-be buyers are not ready to move on.
Gavriel Kahane and Jonathon Blackwell, Arkhouse managing partners, said in their own statement that the investor group has been engaged privately with Macy’s on their proposed deal in recent weeks.
“Our investor group can confirm that we collectively have a significant stake in Macy’s through Arkhouse-managed funds and made a proposal to acquire the company for $21 per share in cash on Dec. 1,” Kahane and Blackwell said.
“We encourage the company to respond to us this week, as it indicated, without further delaying substantive discussions,” they said. “We see the potential for a meaningful increase to our original proposal if we are granted access to the necessary due diligence and, to that end, have offered to sign a mutual non-disclosure agreement to conduct this due diligence.”
“We are highly motivated to consummate an acquisition of Macy’s and are prepared to pursue all necessary steps, including direct engagement with stockholders, to achieve this goal,” they said.
That raises the possibility of a showdown at the retailer’s annual meeting, usually held in May, where shareholders vote on new directors to oversee the company.