Erik and Pete Nordstrom Offer $3.8 Billion to Buy the Retailer

The offer is in.

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Brothers Erik and Pete Nordstrom, along with other members of the Nordstrom family and Mexican retailer Liverpool, have offered to acquire all of the outstanding shares of the company the group does not already own for $23 a share in cash for a total of $3.8 billion.

By the end of trading on Thursday, Nordstrom’s stock price was down just 0.18 percent, or $0.04, to $22.75, suggesting that the market does not expect a higher offer to emerge.

The offer was received by a special committee of the board of directors of Nordstrom Inc., which confirmed the receipt of it on Wednesday morning.

The proposal states that the merger consideration would be financed through a combination of rollover equity and cash commitments by members of the Nordstrom family and Liverpool and $250 million in new bank financing, with the existing indebtedness of the company to remain outstanding. Mexico’s Liverpool department store chain had 15.76 million shares of Nordstrom, representing a 9.63 percent stake as of June 30, 2024. Liverpool first purchased Nordstrom stock in 2022 and is the largest institutional holder of Nordstrom stock.

The special committee, composed of independent and disinterested directors, was formed in response to interest expressed by Erik and Pete Nordstrom earlier this year in exploring a possible transaction. Erik is chief executive officer of Nordstrom, and Pete is president and chief brand officer. The brothers own approximately 9.5 percent of the stock, while the Nordstrom family owns approximately one-third. The family and any partners would have to own more than 50 percent of the voting shares to go private.

“The special committee and the other independent directors will carefully review the proposal in consultation with independent financial and legal advisers to determine the course of action that is in the best interests of Nordstrom and all shareholders. No action is required by Nordstrom shareholders at this time,” the committee said in its statement Wednesday.

“There can be no assurance that the company will pursue this transaction or other strategic outcome, or that a proposed transaction will be approved or consummated. The company does not intend to disclose further developments regarding this matter unless and until further disclosure is determined to be appropriate or necessary,” the committee stated.

The Nordstroms tried to take their company private in 2017, offering to pay $50 a share , or $8.4 billion, with the backing of Leonard Green & Partners. That offer was considered too low and rejected by a special committee of the board. Nordstrom’s market capitalization stands at about $3.75 billion.

Going private takes the Nordstroms out from under the constant glare of Wall Street, and enables them to eliminate the time and costs of producing quarterly reports, staging conference calls and meetings with investors. They’ll deal with less scrutiny, far fewer stakeholders and regulatory requirements, and can be more decisive with a smaller constituency to report to. They’ll have more time to focus on long-term strategy and spend time with their families. Private companies can be less transparent so competitors know less about what they’re up against.

“That the Nordstrom family have made an offer to buy the department store chain comes as no surprise. What is interesting is the $23 a share value, which is pretty much the current price of the stock,” Neil Saunders, managing director of GlobalData, commented. “The lack of any real premium would, under normal circumstances, make the offer unattractive. However, as a family-run firm the dynamics are slightly different, and it will be up to an independent committee to determine whether this is in the best interests of the company and its investors.

“On their own, the founding family would likely have some constraints around how much they want to pay. However, the involvement of Liverpool in the deal may mean there is potential to push the price higher — something the committee may well consider,” Saunders added.

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“The offer comes at a time when Nordstrom is getting back on track after a long period of poor performance. However, the business remains one of two halves. The department store division has various structural challenges, while the off-price Rack division is starting to produce some good growth. This mixed outlook will limit the amount any party is willing to pay,” Saunders observed.

In the second quarter of this year, Nordstrom’s net earnings were down somewhat due to an asset impairment charge involving a decision to not open a new fulfillment center on the West Coast. But net sales increased 3.4 percent to $3.89 billion and comparable sales increased 1.9 percent, compared with the same period in fiscal 2023. Second-quarter net earnings came to $122 million, or 72 cents per diluted share. Earnings before interest and taxes reached $190 million. That compares to net earnings of $137 million, or 84 cents per share, and EBIT of $192 million in the year-ago period.

The results were better than department store peers including Macy’s and Dillard’s, which earlier this month reported negative sales in the second quarter impacted by consumers holding back on spending and feeling pinched by inflation. The Nordstroms said the business was driven by improved merchandise flow; greater full-price selling; rolling out radio frequency identification, which provides faster inventory data; private brands gaining traction following a refresh unveiled earlier this year, and continued momentum at Rack, which is opening 23 stores this year.

Based on its second-quarter results, the Seattle-based retailer raised slightly its comparable sales forecast for 2024 to flat to 2 percent ahead, from its previous projection of negative 1 percent to positive 2 percent.

Morgan Stanley & Co. LLC and Centerview Partners LLC are acting as financial advisers to the special committee, and Sidley Austin LLP and Perkins Coie LLP are acting as legal counsel.

Liverpool, at a Glance

Liverpool is a 177-year-old  Mexican chain of 124 department stores selling a wide range of mostly-moderate priced merchandise including fashion, appliances, home goods, beauty products, fragrance, books, magazines, food and other categories.

Liverpool, officially named El Puerto de Liverpool, S.A.B. de C.V.perfume, is part of a Mexican conglomerate based in Mexico City.  The Liverpool department stores fill a niche priced above the Sears subsidiary department stores found throughout the country, and below the upscale, designer-driven El Palacio de Hierro department stores.

Aside from its Liverpool and Suburbia department store chains, the conglomerate operates malls, fashion boutiques, insurance, and consumer credit. In total, Liverpool operates about 300 stores. The company also has a large stake in Unicomer, a retailer operating through much of Latin America.

Liverpool has bolstering online promotions and providing easier credit through its store card as well as launching new omni-channel strategies to counter the insurgence of Chinese retail giant Shein.

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