Macy’s Inc. ended seven months of takeover talks with Arkhouse Management and Brigade Capital Management, citing a lack of a “compelling” proposal with guaranteed financing. On Monday, Macy’s announced its board’s unanimous decision to end the negotiations, which could have ultimately taken the retailer private.

“At this time, after careful review, we have concluded that Arkhouse and Brigade’s proposal lacks certainty of financing and does not deliver compelling value, notwithstanding the significant time, resources, and information shared during this process,” Macy’s lead independent director Paul Varga said in a statement.

Arkhouse and Brigade did not respond to Digital Commerce 360’s requests for comment. Macy’s replied, stating it had no additional comments beyond the news release.

Macy’s ranks No. 16 in Digital Commerce 360’s Top 1000 Database of the largest North American e-retailers by online sales. Macy’s is also the second-largest Apparel & Accessories retailer in the database. Digital Commerce 360 projects Macy’s total web sales in 2024 will reach $7.30 billion.

Macy’s web sales by year

Arkhouse’s takeover attempt at Macy’s

Arkhouse and Brigade tried to buy out Macy’s for months. In December, the investor group offered $21 per share, or $5.8 billion, which the retailer rejected. The firms recently increased their bid to $24.80 per share, or $6.9 billion, up from $24 per share in March.

When Macy’s rejected Arkhouse and Brigade’s initial bid, it triggered a proxy battle that ended in April when the retailer added two new board members backed by the real estate investment firm. Macy’s also agreed to open its books for due diligence.

After stating that it had gone “well beyond what is customarily required,” Macy’s requested a definitive proposal by June 25. However, on June 26, Arkhouse and Brigade submitted a “check-in” letter offering $24.80 per share in cash. Macy’s said it had already deemed that offer “not compelling” and the accompanying financing papers were not sufficient.

Challenges department stores face

Arkhouse and Brigade’s bid focused on monetizing Macy’s real estate assets rather than revitalizing its retail operations. That potential fate opened the door to comparisons with other struggling department store names, such as Sears and Neiman Marcus, which recently reached a deal to be acquired by Hudson’s Bay Co.

“The truth is that whatever problems Macy’s has, they will not be solved by activist investors treating the business as an ATM and selling off real estate for short-term gain,” Neil Saunders, GlobalData managing director, wrote in a LinkedIn post.

Saunders told Digital Commerce 360 that ending the talks shows Macy’s strength, signaling that the bid isn’t in the company’s best interests and that management’s current plans offer better long-term value for investors.

Macy’s ongoing turnaround plan

In February, Macy’s unveiled its “A Bold New Chapter” strategy, which includes closing 150 underperforming stores through 2026. Macy’s also plans to open about 15 new Bloomingdale’s and 30 new Bluemercury luxury stores over the next three years.

CEO Tony Spring, who began in February, said the initiatives are starting to show results.

“While it remains early days, we are pleased that our initiatives have gained traction, reinforcing our belief that the Company can return to sustainable, profitable growth, accelerate free cash flow generation and unlock shareholder value,” Spring said in a written statement.

Most recent quarterly earnings from Macy’s

In its fiscal quarter ended May 4, Macy’s reported a 2.7% year-over-year decline in net sales to $4.8 billion and a 1.2% decrease in comparable sales, including online. Macy’s said it will provide updates on “A Bold New Chapter” in its second fiscal quarter earnings report next month.

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