Macy’s Shares Soar After Reports of $5.8B Buyout Offer

Macy’s (NYSE: M) shares rose more than 15% ahead of the market opening on Monday after WSJ reported that an Arkhouse Management and Brigade Capital investor group offered to acquire the department store operator for $5.8 billion.

Investor Group Offers to Buy Macy’s With a 20% Premium

Macy’s has reportedly received an acquisition offer from Arkhouse Management and Brigade Capital Management that values the department store chain at $5.8 billion. The company’s shares soared 15.3% in premarket trading Monday following the news.

An investor group consisting of two asset management firms offered to buy Macy’s at $21 per share, marking a noteworthy premium of more than 20% to the retailer’s Friday closing price of just over $17 per share. Per the reports, Arkhouse and Brigade Capital would be willing to send an improved bid based on due diligence to acquire the embattled retailer. 

The investor group already holds a significant stake in Macy’s via Arkhouse-managed funds and has discussed the acquisition proposal with the company, whose board subsequently met to discuss the bid. If the deal is agreed, the group plans to take Macy’s private.

Macy’s has become an appealing target for investors after facing a myriad of challenges, including waning sales and intensifying competition. The department store operator made multiple strides to win back customers’ confidence, but its sales and stock continue to decline despite those efforts. Year-to-date, shares of Macy’s fell more than 13.6%.

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Macy’s Real Estate Holdings Could Be the Target

Reasons why Macy’s became an attractive prospect for investors are numerous, but in this case, it could be that Arkhouse and Brigade Capital’s interest may not be primarily driven by the company’s underperforming sales and stock.

As suggested by a New York Times report, department stores have been a common target of takeover attempts by investors who are looking to capitalize on prime real estate, and that’s precisely what Arkhouse is focusing on with its acquisitions. Notably, the investment firm targets what’s known as “mispriced” real estate assets, and in that light, Macy’s seems to be a unique opportunity.

Among its many valuable real estate holdings is Macy’s prime Herald Square location. But that’s just one of many, as Macy’s commands a broad network of more than 600 stores across the country. Remarkably, its real estate assets have an estimated value of $16 billion, compared to the company’s market value of $4.7 billion, according to an analysis by Cowen, the investment management and banking firm.

What do you think about the New York Times’s suggestions that Arkhouse and Brigade Capital may target Macy’s because of its valuable real estate portfolio? Let us know in the comments below.