Nordstrom Family Proposes $3.8 Billion Buyout in Second Attempt to Go Private
In a significant move within the retail industry, brothers Erik and Pete Nordstrom, along with other Nordstrom family members and Mexican retailer Liverpool, have proposed a $3.8 billion buyout to privatize Nordstrom Inc. This proposal involves acquiring all outstanding shares not already owned by the group at $23 each, aligning closely with current market prices, and is a revisitation of a previous attempt made in 2017.
The earlier endeavor to take Nordstrom private, led by the Nordstrom brothers with backing from Leonard Green & Partners, was valued at $50 a share, totaling $8.4 billion, which was subsequently declined by a special committee of the board as being too low. Current market valuations place Nordstrom’s capitalization at approximately $3.75 billion, nearly matching the proposed buyout price.
This offer was made public by a special committee of Nordstrom’s board, which includes independent directors tasked with evaluating the deal’s feasibility and fairness. Financing for the deal is planned through a mix of rollover equity, cash commitments by the Nordstrom family and Liverpool, and $250 million in new bank financing, with existing company debts remaining unchanged.
The strategic implications of this move are significant. By going private, the Nordstroms would shift away from the rigorous demands of public market transparency, such as quarterly reporting and regular investor meetings, allowing them to focus more on long-term strategies and less on short-term market pressures. This could also mean greater operational flexibility and potentially more aggressive business maneuvers that are not constantly under the scrutiny of Wall Street analysts and investors.
The offer price does not include a significant premium over the current stock price, which could typically deter shareholders. Yet, the family-oriented nature of the proposal and the involvement of Liverpool suggest that negotiating dynamics could differ, potentially leading to a revised offer.
The bid surfaces at a time when Nordstrom shows signs of recovery following a challenging period marked by underperformance. The company’s recent financial health, highlighted by a 3.4% increase in net sales to $3.89 billion and a 1.9% rise in comparable sales in the second quarter, contrasts with the negative trends seen in other department stores like Macy’s and Dillard’s.
The independent committee, advised by financial firms Morgan Stanley & Co. LLC and Centerview Partners LLC, and legal firms Sidley Austin LLP and Perkins Coie LLP, is set to review the proposal thoroughly. They will consider whether the transaction aligns with the best interests of Nordstrom and its shareholders amidst an evolving retail landscape. No immediate action is required from Nordstrom shareholders as the review process unfolds.
The outcome of this proposal could set a precedent for other family-led firms considering similar strategic shifts in an increasingly unpredictable market environment.