HBC, parent to Saks Fifth Avenue, appears on track to close its $2.65 billion acquisition of Neiman Marcus Group and could lock in a junk bond offering by some time next week to shore up the financing.
“We are working with Jefferies Financial Group on a bond. It’s going very well. It’s oversubscribed,” Richard Baker, HBC executive chairman and chief executive officer, told WWD on Wednesday.
The bond, Baker said, “should be closing in a week. The bond market is very strong. The bond market loves the deal.” He said he’s working to get the bond executed in a way that’s “the cheapest, fastest and best way” possible.
When HBC unveiled the Neiman Marcus deal in July, the company said the purchase price would be funded by a combination of equity capital from new and existing shareholders and debt facilities, including Amazon and Salesforce as new investors. Rhône Capital continues as an investor and Insight Partners, an investor in Saks.com, becomes a shareholder in the combined company. Other investors also may have come into the deal since then, sources said.
In addition, HBC secured a $1.15 billion term loan financing from investment funds and accounts managed by affiliates of Apollo. “It’s a signed commitment letter from Apollo, which is to back up the bond,” Baker said Wednesday.
While multiple sources had suggested that the funding from Apollo perhaps could be in doubt, two sources close to the process confirmed Baker’s account and said money was buttoned up and ready to be used in the deal. Apollo declined comment.
Richard Baker
Courtesy image
In July, HBC also said it obtained a $2 billion fully committed revolving asset-based loan facility from Bank of America (lead underwriter), Citigroup, Morgan Stanley, RBC Capital Markets and Wells Fargo.
For a while, it was widely believed that HBC’s deal to buy Neiman Marcus would close early in 2025, possibly February. However, Baker suggested the deal could close even sooner. “We are on course to close the deal. It could potentially happen in the next couple of weeks. Everything is going to get done.”
That would be good news for vendors, considering Saks has been delinquent on payments owed to many of them and multiple sources say it continues to be slow in paying vendors. Last August, a rare conference call between Baker, Marc Metrick, CEO of Saks Global, and Jennifer Bewley, chief financial officer of HBC, provided updates to Saks and Saks Off 5th vendors. While apologetic about how vendors have been treated, the executives urged them to stick with Saks and Saks Off 5th, and expressed extreme confidence that the deal to buy the Neiman Marcus Group would soon close, ultimately benefiting — and not hurting — them.
The executives said at the time that new financing and equity infusions through the deal, future property sales and fall 2024 selling would improve liquidity, helping them to catch up on outstanding payments to vendors, many months past the average 60-day period. They also said they would be more transparent and communicative going forward. However, once HBC takes over Neiman Marcus, the new and bigger retail entity created would be able to exert greater buying power over the vendors.
Initially the government was expected to take a close look at the deal especially, because it involved Amazon and, in the view of many observers, because it put HBC in a position to raise prices, close stores, lay off workers and increase pressure on vendors. But the Federal Trade Commission, which successfully derailed Tapestry Inc.’s $8.5 billion acquisition of Capri Holdings, gave the deal a green light without making a second request for more information.
Saks Global already encompasses Saks Fifth Avenue, Saks Off 5th and real estate assets and, once the deal is closed, will include Neiman Marcus and Bergdorf Goodman. Baker serves as executive chairman of Saks Global, which is set to generate $10 billion in sales, with Saks accounting for about $6 billion of that and Neiman’s making up the other $4 billion. Executives involved in the deal have said that each retail banner would continue operations under their respective brands.
For years, many in the industry have anticipated a Saks-Neiman’s combination. In fact, the day Baker disclosed that HBC was purchasing Saks Fifth Avenue in 2013, he also told WWD that he would one day acquire the Neiman Marcus Group to create a North American luxury retail empire.
Sources have told WWD that there is a $100 million breakup fee entitled the Neiman Marcus Group if the deal fell through. Baker did not comment on that, but the fee would be another incentive to get the deal done.
The deal has become kind of a nexus point for rumors and anxiety in the fashion industry with:
- Smaller designers wondering over their future sales to Saks and Neiman’s.
- Questions around just how Amazon’s role in Saks Global will evolve.
- And dealmakers waiting to see how the combination works and what becomes of Saks’ tie-up with Jamie Salter — Authentic Luxury Group — which could go on as an acquirer of high-end brands, incubator of growth through strategic licensing and distribution partnerships.
When the transaction finally closes and Saks and Neiman Marcus end what has become a years-long dance, all the “what ifs” will be done and the fashion ecosystem that relies on the retailers will have to turn to the next question. What now?
