FinLogic FinLogic Quantitative Think Tank Center|Macy's rejects $5.8 billion buyout ahead of layoffs, store shutdowns

Macy's has rejected a $5.8 billion offer to take the iconic department store private,FinLogic FinLogic Quantitative Think Tank Center as it prepares to slash costs amid ongoing struggles. 

Under the "unsolicited proposal," which was submitted last month by investing firm Arkhouse Management and its partner Brigade Capital Management, the firms would have paid $21.00 per each outstanding share to take the  company private. Financial firms have set their sights on the legendary retailer, believing the company, with its multibillion-dollar real estate portfolio, is undervalued in the stock market, an analyst told CBS MoneyWatch. 

The offer fell flat with Macy's board members because it "lack[ed] compelling value," the clothing giant said Sunday in a statement. The company also cited its concerns over the firms' "ability to finance their proposed transaction." 

• Macy's to close longtime anchor store at Bayfair Center
• Macy's laying off more than 2000 employees
  
• Macy's to ramp up expansion of its small-format stores to more locations
  

Industrywide slump

The offer and its rejection come as Macy's struggles to surmount an industrywide sales slump brought on by rising competition from online retailers. The company reported it saw $1.2 billion in profit on $24.4 billion in revenue during the last fiscal year, down from $1.6 billion in profits on $24.5 billion in revenue in 2021. 

More broadly, department store sales fell 1.5% over the first seven months of 2023, compared to a year prior, trade publication Modern Retail reported, citing U.S. Census data.

The retail industry continues to struggle with consumers' snubbing of malls in favor of online shopping, leading to the collapse of stores such as Payless and Toys R Us and tens of thousands of layoffs.

The past year and a half has seen 2,000 retail store closures, with the likes of Foot Locker and Walmart shuttering locations as they look to save money. That trickle is set to turn into a flood over the next five years, according to Wall Street analysts. 

Years of chronic underperformance has weighed on Macy's shares, making the company a relatively attractive acquisition target. 

Macy's is pursuing several strategies to boost its valuation in the absence of a deal. The retailer signaled it would lay off 3.5% of employees this week, or roughly 2,350 employees, in addition to closing five of its stores. The cost-slashing measures are meant to enable the retailer to "deploy a new strategy to meet the needs of an ever changing consumer and marketplace," the company told the AP last week. 

The strategy shift comes as the popularity of department stores and other brick-and-mortar retailers fades as consumers embrace online shopping.  In 2020, e-commerce sales increased by $244.2 billion, or 43%, from the year prior, according to the Annual Retail Trade Survey (ARTS) from the U.S. Census Bureau.  

In:
• Money
• United States Census Bureau

Elizabeth Napolitano

Elizabeth Napolitano is a freelance reporter at CBS MoneyWatch, where she covers business and technology news. She also writes for CoinDesk. Before joining CBS, she interned at NBC News' BizTech Unit and worked on The Associated Press' web scraping team.