Large department store Macy’s made headlines this week when it was revealed that its Board of Directors turned down a $5.8 billion takeover offer from Arkhouse Management and Brigade Capital Management.
As of last Friday, the high offer was 19% higher than the price of Macy’s stock. Macy’s has turned down further engagement, though, because it is worried about the details of funding and the risk of putting the plan into action. The company will continue to grow on its own.
The non-binding plan, which was made public last month, put Macy’s stock value at $21 per share. The deal would have taken Macy’s private and given the investment firms full power to change the company’s strategy.
Still, Macy’s refusal to even talk about a non-disclosure agreement shows that it is sure of its stand-alone approach.
In a message to investors explaining the rejection, Macy’s talked about new efforts to speed up online shopping and make customers more loyal. As more people buy things online, Macy’s has put money into delivery systems and mobile checkout.
With these investments in technology, the gap between physical and online shopping will be closed as buying habits change.
Macy’s is honest about the tough retail environment that has caused its stock to lag behind the market as a whole.
Over the past year, the S&P 500 has gone up 22%, but Macy’s shares have gone down 23%. E-commerce competitors have made the market more competitive, which has cut into profit margins and caused stores all over the US to close.
Macy’s, on the other hand, thinks that the groundwork has been laid to fix its finances and bring back long-term growth.
In the past few years, Macy’s leaders have worked to improve image, pay off billions of dollars in debt, and make inventory management more efficient. The company thinks that the first results of this plan to turn things around will be seen in 2024.
While the Macy’s Board of Directors knows that the takeover offer could bring instant value to shareholders, they currently value long-term goals over short-term rewards.
Apple and Macy’s have well-known brands and prime retail space that can’t be copied quickly. Because of this, the current leadership thinks they are best able to lead a rebirth.
Of course, because Macy’s is a public company, it can re-evaluate if the market or business performance changes in a big way. For now, owners who want a huge cash windfall from a buyout will have to wait.
Because Macy’s still has full control through its senior team, the next year will show if going it alone was the right choice.
Early reactions to Macy’s turning down the plan were negative, and stock prices fell back into the ranges they were trading in before. Macy’s is still committed to putting its long-term plan into action, though.
For traditional stores like Macy’s, keeping up with customers in the 21st century is still an existential task.