Department store M&A heats up; Soho House attracts interest from buyers; and much more
Happy Friday!
This week, it was all about M&A talks involving some of America’s most iconic department store chains. Greg Roumeliotis and Abigail Summerville were first to report that the founding family behind Nordstrom is seeking to take the department store operator private, six years after a similar attempt proved unsuccessful.
The deal deliberations come as Nordstrom and other U.S. retailers grapple with consumers curbing their discretionary spending following a bout of inflation and high interest rates. Nordstrom has asked investment banks Morgan Stanley and Centerview Partners to reach out to private equity firms and gauge their interest for a potential deal.
Nordstrom shares rose 12% after our scoop was published. Nordstrom has more than 350 stores as well as e-commerce operations. Chief Executive Erik Nordstrom and other members of the Nordstrom family collectively own about a 30% stake in the Seattle-based company.
Nordstrom formed a special board committee in 2017 to consider a bid by the family to go private and explored a deal with several private equity firms, including Leonard Green. The special committee in 2018 turned down an $8.4-billion offer as inadequate.
A few hours later, Abigail teamed up with Svea Herbst-Bayliss to scoop that Macy's will open its books to Arkhouse and Brigade Capital. The developments marks a potential breakthrough in the investment firms' $6.6 billion bid to take the U.S. department store operator private.
Macy's, which had snubbed Arkhouse and Brigade's previous acquisition overtures, has now entered into a confidentiality pact with them that allows the exchange of commercially sensitive information.
Having access to such due diligence could enable Arkhouse and Brigade to secure debt commitments to finance the deal. The firms have so far secured letters from firms such as investment bank Jefferies Financial indicating confidence a debt package can be put together.
The firms have also provided commitments for the equity portion of their bid. Their equity partners include Fortress Investment Group and One Investment Management US. Macy's shares jumped 3% on the news.
Arkhouse and Brigade have already raised their offer from $21 to $24 per share and have said they are open to increasing their bid further subject to due diligence.
Arkhouse has also mounted a board challenge against Macy's, seeking to replace a majority of directors by naming nine candidates for election to the 14-member board. It intends to push ahead with its challenge even as the two sides are holding discussions, one of the sources said.
In their analysis on the deal talks, Kate Masterson and Abigail pointed out that investments in retail and consumer companies accounted for just 7% of the total U.S. private equity deal volume of $2.6 trillion in the last decade compared to nearly 15% of the total volume of $1.7 trillion in the prior decade.
But deals Macy’s and Nordstrom might change the dynamic, putting private ownership of major U.S. retailers back in vogue. Watch this space for more.
Elsewhere, CC Capital, the investment firm led by former Blackstone executive Chinh Chu, is one of the suitors in talks to take members club operator Soho House private, yours truly reported.
The talks with CC Capital have been on and off since late last year, and a deal is uncertain, the sources said. Soho said on Feb. 9 that it had formed a special board committee to explore taking the company private.
Soho Executive Chairman Ron Burkle's investment firm Yucaipa and Soho founder Nick Jones collectively own about three-quarters of the company.
Burkle in an open letter to Soho shareholders on Monday said he would be rolling his stake in a deal and that the stock market, which values Soho at about $1.8 billion, including debt, is not giving the company its true worth. Soho's stock has lost more than 55% of its value since the company floated its shares in New York in 2021.
Soho's shares jumped more than 20% on Monday morning after Reuters reported the talks with CC Capital.
The sources asked not to be identified because the matter is confidential. Soho House did not immediately respond to a request for comment, while CC Capital declined to comment.
Soho was started by Jones in 1995 on London's Greek Street above his restaurant, Cafe Boheme, as a meeting place for creative people. Its portfolio now includes Soho Houses in Amsterdam, Tel Aviv and Mumbai, The Ned in London and the Scorpios Beach Club in Mykonos.
And finally, hot off the press, David Carnevali was first to report this evening that Robert Bosch GmbH, Lennox International and Samsung Electronics are among the suitors competing to acquire heating and ventilation businesses worth over $6 billion from Johnson Controls International.
Milwaukee-based Johnson Controls has been working with its advisers to sell its residential and light commercial businesses, which includes a U.S. business and a 60% stake in an air-conditioning joint-venture business with Japan's Hitachi Ltd that is called Johnson Controls–Hitachi Air Conditioning.
Johnson Controls has been attempting to divest the portfolio of heating and ventilation assets as part of its efforts to jettison non-core businesses.
Founded in 1885, Johnson Controls is a manufacturer of a wide range of appliances and equipment for commercial buildings, as well as home comfort appliances. It provides electronic systems for offices, schools, and hospitals in areas such as ventilation, security, and fire detection.
Recommended by LinkedIn
And here’s a quick recap of the highlights from the Reuters corporate finance file from the past week:
Boeing is looking at how Spirit AeroSystems could shed or sharply reduce its ties to Airbus, as the supply-chain giant's work for the European planemaker poses complications in rival Boeing's attempt to acquire its former subsidiary.
What do George Lucas, Jamie Dimon and the family of Walt Disney have in common? The creator of "Star Wars," the billionaire Wall Street CEO and the descendants of Walt Disney's founders have thrown their support behind Chief Executive Bob Iger and the entertainment company's board nominees in a high-stakes fight.
U.S. energy pipeline and storage operators have spent two years watching the consolidation of oil and gas producers, and now they are gearing up for the merger wave to hit their sector, executives, investors, and analysts said.
The private equity owner of Chosen Foods is preparing to explore a sale that could value the avocado-based food products company at around $600 million or more, including debt, according to people familiar with the matter.
Technology and consulting services firm Synechron has confidentially filed for an initial public offering (IPO) that could happen as early as the first half of 2024, according to people familiar with the matter.
Israeli cybersecurity firm Cato Networks, which was valued at more than $3 billion in a private funding round last year, has hired underwriters for an initial public offering in New York, according to people familiar with the matter.
A strong debut by Swiss skincare company Galderma is steadying nerves around Europe's IPO market, a day after a poorly received listing from German retailer Douglas, bankers said.
Penta Investments is weighing a possible sale of its betting and gaming operator Fortuna Entertainment Group, a spokesperson told Reuters.
Thank you for reading this week’s edition. Please do share the newsletter with anyone you think might find it useful.
Have a wonderful weekend!
Best,
Anirban
· · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · ·
Anirban Sen
Editor in Charge, U.S. Mergers & Acquisitions
Reuters News
Thomson Reuters