Macy's ends buyout talks with Arkhouse and Brigade after months of negotiations

department store Macy's reported Monday that its board of directors unanimously decided to end negotiations with the activist group that sought to take the retailer private for about $6.9 billion, saying in a statement that questions about financing and the premium remain insurmountable.

“We have concluded that Arkhouse and Brigade’s proposal does not provide certainty of financing and does not deliver compelling value,” said Paul Varga, Macy’s independent chief executive officer, in a press release.

Arkhouse and Brigade have been trying to buy the storied retailer for months. Earlier this month, the bidders raised their offer to $24.80 per share, the latest in a series of price hikes since they began their takeover bid last year.

Macy's said the company had “gone beyond what is customary” in a due diligence period, providing the bidder group with store-by-store profit and loss information and leases for each location. The company also noted that Arkhouse and Brigade had been authorized to share that confidential information with more than a dozen “credible financing sources.”

Arkhouse said earlier this year that it planned to launch a proxy fight for control of Macy's after initial attempts were rebuffed. The two sides were able to reach a settlement in April, adding two independent directors to Macy's board.

Arkhouse did not immediately respond to a request for comment. Shares of Macy's fell about 14% in early trading Monday.

Macy's is in the midst of a turnaround under CEO Tony Spring, who took over as CEO in February. The department store owner announced earlier this year that it would close about 150 of its namesake stores and open new locations of Bloomingdale's and Bluemercury, the two brands that have posted stronger results. It is also opening smaller Macy's locations in busy suburban shopping malls.

But the traditional department store operator's efforts to grow sales have been stymied by high inflation as consumers become more selective in their spending on discretionary items. Macy's has also had to fight to stay relevant as younger shoppers turn to online players like Shein, big-box stores like Goal and discount chains such as TJ Maxx instead of department stores.

For the fiscal year, Macy's expects net sales to be between $22.3 billion and $22.9 billion, down from $23.09 billion in 2023. Comparable sales, which exclude the impact of store openings and closures, are expected to range from a decline of approximately 1% to an increase of 1.5% based on own sales plus licenses, including sales through third-party marketplaces.

During an earnings call in late May, Spring said Macy's is in the “early innings” of revitalizing its namesake stores. Still, he pointed to better sales at the first 50 stores where Macy's has invested in increased staffing, sharper merchandise displays and special events.

Before Monday's losses, Macy's shares had fallen about 5% so far in 2024 to a market value of about $5 billion, lagging the S&P 500's gain of about 18% over the same period.

Arkhouse is a well-known real estate investment firm led by Gavriel Kahane and Jonathon Blackwell. While it is not a conventional activist investment firm, it has made a handful of unsolicited bids for REITs in recent years. Brigade Capital Management focuses on retail companies and has previously invested in names such as Sears and Neiman Marcus.

Together, the bidding group sought to unlock what it saw as trapped value in Macy's real estate holdings while simultaneously overhauling the company's operations. Other department store names have been targets of activists in the recent past for similar reasons: In 2022, activist fund Macellum urged Kohl's sell themselves.