Arkhouse Issues Statement on Macy’s, Inc.
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Insights
The proposal by Arkhouse Management Co. LP to acquire Macy's at $21.00 per share represents a significant premium over the recent stock price, indicating a bullish stance on Macy's future performance. The premiums of 32.4% and 56.8% over the unaffected stock price and the 30-day volume-weighted adjusted stock price, respectively, are substantial and suggest that the investor group sees undervalued potential in the retailer. A successful acquisition could lead to strategic shifts and operational improvements aimed at unlocking value, which might be challenging to achieve under the scrutiny of public markets.
However, the market's reaction to the news of the potential acquisition and the subsequent gains in Macy's stock price reflect investor sentiment that may already be pricing in the possibility of a deal. The mention of a 'highly confident letter' from Jefferies Group LLC regarding financing reassures stakeholders of the seriousness and feasibility of the offer. The acquisition could also impact Macy's debt profile, credit ratings and operational strategies, which are all crucial factors for investors to monitor.
The retail industry has been facing significant headwinds with changing consumer behaviors and the rise of e-commerce. Macy's, like many traditional retailers, has been undergoing restructuring to adapt to these trends. The mention of a 'broad-based restructuring' by Macy's indicates ongoing efforts to streamline operations and improve financial performance. The acquisition bid by Arkhouse suggests that private ownership could accelerate these efforts by removing the quarterly earnings pressures and allowing for longer-term strategic planning.
Furthermore, the investors' belief that Macy's potential will be better realized as a private company implies that there might be operational inefficiencies or market misperceptions that are currently constraining the company's valuation. If the acquisition goes through, it could serve as a case study for similar buyouts in the retail sector, potentially triggering a wave of privatization as companies seek to reposition themselves away from the public eye.
The offer to sign a mutual non-disclosure agreement for due diligence is a standard procedure in acquisition negotiations, safeguarding sensitive financial and operational data. This step is critical as it allows the potential buyer to assess the company's intrinsic value more accurately and possibly adjust the offer accordingly. The engagement of reputable legal advisors, such as Cadwalader, Wickersham & Taft LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP, indicates that the acquisition process will be meticulously managed to comply with all regulatory requirements and protect the interests of all parties involved.
It is also important to note that the acquiring party's readiness to 'pursue all necessary steps, including direct engagement with stockholders,' suggests a willingness to take the proposal directly to shareholders, potentially bypassing the board if they deem it necessary. This could lead to a proxy fight or other forms of shareholder activism if the board does not respond favorably to the acquisition offer.
“In recent weeks, Arkhouse and our partner, Brigade Capital Management, LP, have engaged privately with Macy’s regarding a potential acquisition of the Company. 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
We encourage the Company to respond to us this week, as it indicated, without further delaying substantive discussions. 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 have conviction in the long-term success of Macy’s but believe that its potential will only be realized as a private company. We believe Macy’s investors support a privatization given the stock’s largest single-day gain in more than two years following media reports of our interest in acquiring the Company. In the absence of further updates, Macy’s shares have fallen — including after the Company’s announcement last Thursday of a broad-based restructuring.
Jefferies Group LLC has provided a highly confident letter supporting our ability to raise the necessary funds for the transaction. Following conversations between our respective advisors, Macy’s advisors confirmed that they had no further questions regarding our financing. We urge Macy’s to engage expeditiously in good faith discussions with the goal of achieving a mutually agreeable transaction that can provide superior value to stockholders. 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.”
Advisors
Cadwalader, Wickersham & Taft LLP is serving as legal counsel and Longacre Square Partners is serving as strategic advisor to Arkhouse. Paul, Weiss, Rifkind, Wharton & Garrison LLP is serving as legal counsel and Jefferies Group LLC is serving as financial advisor to the buyer group.
About Arkhouse
Arkhouse takes a private equity approach to its public market investing, and employs selective shareholder engagement strategies, to unlock unrealized equity value caused by the mispricing of real assets in the public market. Arkhouse’s team of professionals have invested in a diverse range of asset classes and throughout the capital stack. This broad experience ensures a continuous flow of new investment opportunities and a creative approach to the sourcing, structuring, closing and management of those investments.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240121721299/en/
Arkhouse
Longacre Square Partners
Scott Deveau / Joe Germani
arkhouse@longacresquare.com
Source: Arkhouse Management Co. LP
FAQ
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