Macy’s rejects $5.8B offer; bidder threatens to go directly to holders

Macy’s (NYSE:M) rejected a $21 a share takeover offer from investment firms Arkhouse Management and Brigade Capital Management.

The private equity frims earlier Sunday, before the official rejection from Macy’s (M), threatened to go directly to shareholders with their $5.8 billion offer for the department store chain.

“We are highly motivated to consummate an acquisition of Macy’s and are prepared to pursue all necessary steps, including direct engagement with stockholders, to achieve this goal,” Arkhouse Managing Partners Gavriel Kahane and Jonathon Blackwell said in a statement earlier on Sunday.

Arkhouse said that in recent weeks, the firm and Brigade Capital have engaged privately with Macy’s (M) regarding the potential acquisition proposal.

“We see the potential for a meaningful increase to our original proposal if we are granted access to the necessary due diligence and, to that end, have offered to sign a mutual non-disclosure agreement to conduct this due diligence,” the Arkhouse managers added in the statement.

Macy’s (M) responded in a statement on Sunday and said that it has determined that the non-binding proposal does not constitute a basis to enter into a non-disclosure agreement or provide any due diligence information to Arkhouse and Brigade.

“Following careful consideration and efforts to gather additional information from Arkhouse and Brigade, the Board determined that Arkhouse and Brigade’s proposal is not actionable and that it fails to provide compelling value to Macy’s, Inc. shareholders,” Jeff Gennette, Chairman and CEO of Macy’s, said in the statement.

Macy’s (M) board said in a letter to Arkhouse and Brigade that it continues to have “serious reservations” about the investment firms’ abilirt to finance its non-binding proposal.

“As an initial matter, the proposed financing plan remains entirely uncommitted and your `highly confident letter’ is subject to numerous non-standard preconditions,” Macy’s (M) board wrote in the letter. “Even were it to be less conditional, based upon advice from our advisors, we have significant concerns about the viability of the structure of your financing plan.”

News of the Arkhouse potential direct push to shareholders was earlier reported by the WSJ on Sunday. On Thursday the WSJ reported that Macy’s (M) planning to cut ~13% of its corporate staff, or about 2,350 positions, and close five stores.

Last month Women’s Wear Daily reported that private equity firm Sycamore Partners was eyeing department store chain Macy’s (M) for a potential bid.