Macy’s stock dubbed a ‘melting ice cube’ despite a buyout proposal

Macy’s Inc (NYSE: M) popped 17% on Monday following a report that Brigade Capital Management and Arkhouse Management have proposed to acquire the chain of department stores for $5.8 billion.

Macy’s valued at $21 per share

The said offer values each share of Macy’s at $21 which already translates to about a 20% premium on their previous close. Still, Brigade and Arkhouse may be open to an even higher bid subject to due diligence.

The investor group has also signalled intent to take Macy’s private if its proposal is accepted. On CNBC’s “Squawk Box”, Dana Telsey – the Chief Executive of Telsey Advisory Group said today:

Wall Street currently has a consensus “hold” rating on Macy’s stock.

Telsey shares her view on Macy’s stock

On Monday, the Wall Street Journal quoted a letter from an investment bank as well which confirmed that Brigade and Arkhouse can secure the required financing for the said transaction.

It’s also worth mentioning here that Macy’s did beat Street estimates in its latest reported quarter.

Still, Telsey sees the retail stock as a “melting ice cube” as the consumer will likely be challenged in the coming year as reflected in its earnings guidance that currently stands below last year.

Nonetheless, analysts at JPMorgan peg total real estate value of Macy’s at about $8.5 billion, including its location at Herald Square. Wall Street currently has a consensus “hold” rating on the New York listed firm that’s currently down 18% versus its year-to-date high.