Department store chain Nordstrom will be acquired by its founding family and Mexican retailer Liverpool for nearly $4 billion in an all-cash deal, going private at a time when high-end retailers are grappling with slow demand.
The company’s shareholders will get $24.25 for each share they own, Nordstrom said on Monday, an increase from a $23 offer made by the parties in September for shares they did not already own.
The Nordstrom family will retain majority ownership of the company with 50.1%, while the remaining 49.9% will be controlled by El Puerto de Liverpool, the second-largest department store retailer in Mexico.
“For over a century, Nordstrom has operated with a foundational principle of helping customers feel good and look their best,” Nordstrom CEO Erik Nordstrom said in a press release.
“Today marks an exciting new chapter for the business. On behalf of my family, we look forward to working with our teams to ensure Nordstrom thrives long into the future.”
The deal has an enterprise value of $6.25 billion, including debt, and is expected to be partly funded by up to $450 million in borrowings under a new $1.2 billion asset-based bank financing.
The transaction is expected to close in the first half of 2025, the company said.
Nordstrom shares have fallen nearly 70% from their all-time peak in 2015 as the rise of e-commerce giants such as Amazon led to a change in consumer shopping habits. Higher input costs and supply-chain snags following the COVID-19 pandemic have pressured the company too.
Department store chains such as Nordstrom and Macy’s have also struggled to grow their sales over the past couple of years because of shoppers turning thrifty amid soaring inflation, and due to rising competition from off-price chains including T.J. Maxx.
The Nordstrom family tried to take the company private in 2018, offering $50 per share to buy the company, which at the time was valued at $8.4 billion.
But the company’s board rejected the offer as inadequate. In September, the family tried once again — only this time teaming up with Liverpool to offer shareholders a deal at $23 per share at a valuation of $3.76 billion.
At the time of the proposal, the Nordstrom family owned about 54.6 million shares, or 33.4% stake in the company. Liverpool owned 15.8 million shares, or nearly 10% of the shares.
The Nordstroms have long believed that taking the company private would allow them to make long-term investments and changes in the firm without the pressure and scrutiny that comes with quarterly earnings reports.
The chain was founded as a shoe store in 1901 by John Nordstrom, the great-grandfather of the current CEO and president, Erik Nordstrom.
The company branched out to become a luxury retailer that sells clothing and accessories across more than 350 locations nationwide.
El Puerto de Liverpool operates two other department store chains, Liverpool and Suburbia, and owns 29 shopping centers across Mexico.
Shares of Nordstrom are up by more than 32% since the start of the calendar year.
But in its most recent earnings call with analysts, the company’s chief financial officer warned that “the external environment remains uncertain” as the retail sector has struggled under the weight of persistently high inflation and strong competition from the likes of Amazon, Walmart, Target, Shein and Temu.
At the end of the third quarter, inventory grew 6%, outpacing sales growth of 5%.
The increase was partly due to slower sales in seasonal categories like boots, sweaters and outerwear in certain regions, said the company President Pete Nordstrom, adding that they have curated sweaters and luxury fragrances for holidays.
The slowing sales trends seen by Nordstrom in late October could indicate “that the holiday outlook is not great,” said Morningstar analyst David Swartz.
However, the company beat third-quarter revenue and profit estimates on the back of popular brands including On Running, Hoka and Vuori.
With Post wires
Credit: Source link
