Macy’s (M) fell ahead of the market open on Monday after the company announced it had ended acquisition talks with Arkhouse Management and Brigade Capital Management.
The Macy’s Board stated it "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,” it added.
The department store chain operator saw its shares drop nearly 15% before the opening bell.
Following seven months of negotiations, Macy’s provided Arkhouse and Brigade with extensive due diligence and allowed information sharing with credible financing sources. In May, the parties agreed on a timetable for Arkhouse and Brigade to present a fully financed and actionable proposal.
Macy’s formally requested that Arkhouse and Brigade deliver their best purchase price and fully negotiated commitment papers for all necessary debt and equity financing by June 25, 2024.
However, on June 26, Arkhouse and Brigade submitted a "check-in" letter expressing interest in acquiring all outstanding shares for $24.80 per share, an amount previously deemed "not compelling" by Macy’s.
“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,” the company said in the announcement.
Macy’s shares fell around 5% this year, underperforming the broader market.
Macy’s is currently undergoing a turnaround led by CEO Tony Spring, who took over in February. The company plans to close about 150 stores and open new Bloomingdale’s and Bluemercury locations, along with smaller Macy’s stores in suburban strip malls.
However, high inflation has hindered sales growth, as consumers are more selective with discretionary spending. Macy’s also faces challenges staying relevant as younger shoppers prefer online retailers like Shein, Target (TGT), and T.J. Maxx (TJX (NYSE:TJX)).