Shares of iconic department store chain Macy's (M 1.44%) are down 13.3% as of 12:01 p.m. ET today, according to data from S&P Global Market Intelligence, as acquisition talks with a pair of potential suitors have ended with no deal being made. For many investors, the prospect of a buyout was the last great hope for the struggling retailer.
Macy's hard-to-get gambit backfires
The backstory behind today's tumble actually begins in December of last year, when real estate investing outfit Arkhouse Management and investment management firm Brigade Capital first jointly expressed interest in acquiring Macy's. That $5.8 billion ($21-per-share) offer was ultimately rejected, but then raised to $24 per share in March of this year. That bid was also rejected. But it did ultimately result in the addition of two new independent board members, both of whom continued to press for a sale. Arkhouse and Brigade raised their offer one last time early this month, valuing Macy's at $6.9 billion, rekindling discussions as a result. The parties still couldn't come to an agreement, however, prompting Macy's to announce on Monday morning it had terminated these discussions.
It's unlikely that Arkhouse and Brigade will regroup and make yet another higher offer.
NYSE: M
Key Data Points
The decision of course leaves Macy's shareholders wondering what comes next. The department store chain continues to struggle, reporting a 2.7% year-over-year dip in its first quarter's overall revenue, and a 1.2% drop in same-store sales. It's also only been breaking even -- more or less -- since this time last year. It continues to close stores at a brisk clip as well, announcing in February it will shutter on the order of 150 namesake locales within the next three years, with 50 on the chopping block for 2024 alone. Although its so-called "A Bold New Chapter" strategy looks and sounds like a compelling revitalization plan, the retailer has made several such efforts since its sales peaked all the way back in 2014. None of them have proven effective, as none of them have been able to make the company more competitive with the swell of online competition.
The Arkhouse/Brigade offer was shareholders' last best hope
Monday's big pullback is tempting to be sure. But let it go.
Macy's remains on the defensive, with little hope of a real turnaround ever taking hold. Even if the retailer does everything right going forward it still can't change consumers' growing preference for convenience and the wide selection the entirety of the internet offers. There are better opportunities out there that don't require an unlikely miracle to pan out.
As for current shareholders, despite Monday's sizable setback you may want to make an exit sooner than later as well, while shares are still well above last year's low of under $11. It's not as if any other prospective buyers are showing interest in acquiring the company. Take the hint.
