Shares of Macy's (M +1.94%) were surging today after the department-store chain received a buyout offer from two private equity firms. The offer was received on Dec. 1 but was not reported on until this past weekend.
As a result, Macy's stock was up 21.4% as of 12:44 p.m. ET.
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Macy's gets a sweet offer
The buyout offer from real estate investor Arkhouse Management and asset manager Brigade Capital Management values the company at $21 a share, or $5.8 billion, which represented a 32% premium on the stock to when the proposal was first made.
According to reporting in The Wall Street Journal, the investor group believes Macy's is undervalued, and it has support from an investment bank in raising the capital necessary to get a deal done.
Macy's board is considering next steps with the offer, though it isn't clear that it's interested in being acquired for that price.
This isn't the first time that an activist investor has sought to profit from Macy's. Starboard Value accumulated a stake in the company in 2015, urging it to better monetize its real estate, and Jana Partners took a position in 2021, arguing that it should separate its e-commerce business.
NYSE: M
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What's next for Macy's
Macy's has tried every turnaround strategy in the book, it seems, to little avail. It acquired Story, an experiential retail company, in the hopes of boosting traffic; it expanded its off-price Backstage chain; closed underperforming stores and invested in e-commerce. However, the company is still struggling to differentiate itself in a crowded retail market.
Comparable sales and revenue both fell by 7% in its most recent quarter, and earnings per share dropped by 60%.
Considering those results and the broader challenges in the department store sector, Macy's seems better off taking the buyout deal. Investors seem to agree based on the stock's gains today.
