Revised Proposal Lacks Certainty of Financing,
Remains Non-Actionable and Does Not Provide Compelling Value
Reiterates Board and Management’s Commitment to
Shareholder Value Creation and Confidence in “A Bold New Chapter”
Strategy
Macy’s, Inc. (NYSE: M) today announced that, following months of
engagement with Arkhouse Management Co. LP (“Arkhouse”) and Brigade
Capital Management, LP (“Brigade”), its Board of Directors (the
“Board”) has unanimously determined to terminate discussions with
Arkhouse and Brigade that have failed to lead to an actionable
proposal with certainty of financing at a compelling value. The
Board intends for the management team to return its full focus to
enhancing shareholder value through the execution of the Company’s
“A Bold New Chapter” strategy.
Proposal Lacks Certainty of Financing and Compelling
Value
The Macy’s, Inc. Board and management team have engaged in good
faith with Arkhouse and Brigade for more than seven months since
their initial outreach in December 2023 expressing interest in
acquiring the Company.
- In March 2024, the Company entered into a confidentiality
agreement with Arkhouse and Brigade to facilitate a due diligence
process, given they had increased their proposal to $24.00 per
share (from the initial $21.00 proposal) and indicated a
willingness to increase this price further upon access to customary
diligence, potentially to an amount that the Board could consider
compelling.
- The Company has since expended hundreds of hours addressing
Arkhouse and Brigade’s extensive diligence requests, facilitating
diligence meetings with multiple members of the Company’s senior
management as well as its financial and real estate advisors and
providing thousands of documents with a level of detail that went
well beyond what is customarily required to obtain financing for a
public company acquisition, such as providing complete
store-by-store P&L’s and full-form leases for each Macy’s,
Bloomingdale’s and Bluemercury location. The Company also permitted
Arkhouse and Brigade to contact – and share confidential
information with – over a dozen credible financing sources.
- In May 2024, the Company and Arkhouse and Brigade mutually
agreed to a timetable for them to deliver a fully financed and
actionable proposal to Macy’s, Inc. The Company formally requested
two items be delivered by June 25, 2024: 1) the best purchase price
per share that Arkhouse and Brigade were prepared to pay to acquire
the Company, and 2) fully negotiated commitment papers for all the
debt and equity needed to finance the revised proposal, subject
only to the negotiation of definitive documentation and customary
confirmatory due diligence.
- On June 26, 2024, rather than delivering a definitive, fully
financed and actionable proposal, Arkhouse and Brigade submitted a
response they characterized as a “check in” letter expressing an
interest in acquiring all of the outstanding shares of the Company
for $24.80 per share in cash, which is within a range the Board had
previously communicated to Arkhouse and Brigade was not compelling.
Further, the financing papers that accompanied the “check in”
letter were insufficient to give the Board confidence that a fully
committed, financed and viable offer could be attained within any
reasonable period of time – and necessitated bearing an
unacceptable lack of certainty for the Company and its
shareholders. More specifically, Arkhouse and Brigade submitted
highly conditional and unsigned drafts of financing commitment
letters, subject to numerous conditions, including, in certain
cases, diligence on Arkhouse and Brigade themselves.
Notwithstanding the Company’s financial advisors making it clear
that “enterprise level” financing commitment papers would be
required (as is customary for public transactions in the sector),
Arkhouse and Brigade delivered “asset-based” financing commitment
papers tied to the valuation of the Company’s owned real estate,
and subject to appraisals, credit rating outcomes, and
loan-to-value thresholds. Finalizing and funding these commitment
letters would require lengthy additional diligence, including
independent, third-party appraisals of over 140 of the Company’s
individual store and distribution center locations.
Macy’s, Inc. Turning Its Full Focus to Executing “A Bold New
Chapter” Strategy
Following a careful review of the “check in” letter and related
materials in consultation with its independent legal and financial
advisors, the Board unanimously determined that the latest Arkhouse
and Brigade proposal remains non-actionable and fails to provide
compelling value to Macy’s, Inc. shareholders. The Board believes
that continuing diligence is not warranted or in the best interests
of shareholders given: 1) the significant uncertainty that Arkhouse
and Brigade’s financing could or would ultimately be completed
given the substantial conditionality in their financing papers; 2)
the less than compelling value proposed; and 3) the significant
distraction for the management team at a critical point in the
execution of the Company’s strategy. Accordingly, the Board has
further unanimously determined to terminate discussions with
Arkhouse and Brigade and turn its complete focus to enhancing value
for shareholders through the Company’s standalone operating
plan.
“As the Board has consistently demonstrated throughout this
process, we are open-minded to exploring all paths to enhancing
shareholder value. 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. The Board fully supports A Bold New Chapter strategy, and
we believe it provides the best opportunity for value creation,”
said Paul Varga, lead independent director of Macy’s, Inc.
Tony Spring, chairman and chief executive officer of Macy’s,
Inc., added, “Our team continues to be singularly focused on
creating value for our shareholders. 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. We look forward to keeping all Macy’s, Inc.
stakeholders updated on our progress as we continue to implement
our plan and meet the evolving needs of our customers.”
Macy’s, Inc.’s strategy, “A Bold New Chapter,” is gaining
traction across all three of its strategic pillars – strengthening
the Macy’s nameplate, accelerating luxury growth and simplifying
and modernizing end-to-end operations. The Company has seen early
signs of wins, supported by a steady pace of omnichannel
initiatives being developed and capital-light investments focused
on better serving customers. Even in this dynamic consumer
environment, the Company has seen progress within its First 50
Macy’s nameplate stores, which are already outperforming other
go-forward locations.
These achievements are precursors to the value creation
potential inherent in this new strategy over time and the Company’s
ability to return to growth. The Company will share additional
detail on the progress underway on A Bold New Chapter strategy as
part of its second quarter 2024 earnings report next month.
Advisors
Bank of America Securities and Wells Fargo Securities are acting
as financial advisors and Wachtell, Lipton, Rosen & Katz is
acting as legal advisor to the Company.
About Macy’s, Inc.
Macy’s, Inc. (NYSE: M) is a trusted source for quality brands
through our iconic nameplates – Macy’s, Bloomingdale’s and
Bluemercury. Headquartered in New York City, our comprehensive
digital and nationwide footprint empowers us to deliver a seamless
shopping experience for our customers. For more information, visit
macysinc.com.
Forward-Looking Statements
All statements in this press release that are not statements of
historical fact are forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Such
statements are based upon the current beliefs and expectations of
Macy’s, Inc.’s management and are subject to significant risks and
uncertainties. Actual results could differ materially from those
expressed in or implied by the forward-looking statements contained
in this release because of a variety of factors, including Macy’s,
Inc.’s ability to successfully implement A Bold New Chapter
strategy, including the ability to realize the anticipated benefits
within the expected timeframe or at all, conditions to, or changes
in the timing of proposed real estate and other transactions,
prevailing interest rates and non-recurring charges, the effect of
potential changes to trade policies, store closings, competitive
pressures from specialty stores, general merchandise stores,
off-price and discount stores, manufacturers’ outlets, the Internet
and catalogs and general consumer spending levels, including the
impact of the availability and level of consumer debt, possible
systems failures and/or security breaches, the potential for the
incurrence of charges in connection with the impairment of
intangible assets, including goodwill, declines in credit card
revenues, Macy’s, Inc.’s reliance on foreign sources of production,
including risks related to the disruption of imports by labor
disputes, regional or global health pandemics, and regional
political and economic conditions, the effect of weather,
inflation, and labor shortages, the amount and timing of future
dividends and share repurchases, our ability to execute on our
strategies or achieve expectations related to environmental,
social, and governance matters, and other factors identified in
documents filed by the company with the Securities and Exchange
Commission, including under the captions “Forward-Looking
Statements” and “Risk Factors” in the company’s Annual Report on
Form 10-K for the year ended February 3, 2024. Macy’s, Inc.
disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240714675864/en/
Media – Chris Grams communications@macys.com
Leigh Parrish / Arielle Rothstein lparrish@joelefrank.com
arothstein@joelefrank.com (212) 355-4449
Investors – Pamela Quintiliano investors@macys.com
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