Macy's terminates buyout talks with activist group

Macy’s Inc (NYSE: M) ended buyout talks with Arkouse and Brigade on Monday as their proposal “lacks certainty of financing and does not deliver compelling value”.

The announcement arrives after months of negotiations with the activist group that sought to take the storied retailer private for close to $7.0 billion.

M share price is down about 15% at writing suggesting the investors did not want Macy’s to part ways with Arkhouse and Brigade.

Arkhouse and Brigade valued Macy's stock at a premium

Arkhouse and Brigade offered to takeover Macy’s for as much as $24.80 per share which translates to about a 30% premium on its previous close.

Still, the board unanimously decided that the proposal “does not deliver compelling value”, as per Paul Varga - the lead independent director of Macy’s.

Note that Macy’s stock has tumbled to a year-to-date low following the news on Monday.

Why did Macy's pull out of talks with the activist group?

Macy’s went “well beyond what is customarily required to obtain financing for a public company acquisition” and even allowed Arkhouse and Brigade to “share confidential information with over a dozen credible financing sources”.

Still, the proposal from that activist group remained uncertain in terms of financing, as per the retailer’s press release on Monday.

Arkhouse once had plans of engaging in a proxy battle with Macy’s. The retail giant, however, offered two seats to the investment firm on its board to settle in April of 2024.

While Macy’s stock has not been exciting for the shareholders this year, it still pays a dividend yield of 3.64% at writing which continues to keep it attractive for income investors.

Macy’s is attempting to turnaround under CEO Tony Spring who took the helm in February of 2024.

The chain of department stores recently disclosed plans of closing as much as 150 of its namesake stores. Macy’s, instead, committed to investing in opening new locations of Bluemercury and Bloomingdale’s that have been performing significantly better.

Its new chief executive is also focusing on expanding the company’s footprint in malls with smaller Macy’s stores.

Still, persistent inflation has been a significant headwind for Macy’s Inc that saw its sales decline by another 2.7% on a year-over-year basis in its first financial quarter. It’s struggling to compete with the likes of Shein as well since younger shoppers prefer online to in-store experience.

Wall Street currently has a consensus “hold” rating on M share price. Analysts see upside in it to $20 on average that signals potential for a 25% gain from here.