Posted by on February 3, 2017 2:21 pm
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Categories: Business David Einhorn Economy Economy of the United States Finance headlines Hudson's Bay Company Lord & Taylor Lundgren macy's Macy's, Inc. Midtown Manhattan money new york city Private Equity Real estate Saks Saks Fifth Avenue Terry J. Lundgren trade US Federal Reserve

With Macy’s making the headlines in the past few days on speculation it was shopping itself for a potential buyer, a thesis first laid out by David Einhorn one year ago, moments ago the WSJ reported that Hudson’s Bay, the Canadian owner of Saks and Lord and Taylor, has made a takeover approach for the landmark retailer, sending the shares of both companies surging, and tripping a circuit breaker for M, which was lst up just shy of 5%.

The likely catalyst for the sale is that Macy’s veteran CEO, Terry Lundgren, announced last June he would be stepping down later this year.

As the Post recently reported,  Lundgren is trying to avoid an ugly board shakeup that could tarnish his 13-year legacy and turn the largest US department store into a battleground littered with discarded top brass.

Lundgren, who had not planned to cap his tenure with a sale, has recently become open to offers from potential friendly buyers as a proactive measure to head off any attempt to mess with the board, sources familiar with the situation said.  A partner at a private equity firm told The Post that he’d been contacted about a Macy’s sale by a real estate investor — while other industry sources close to the situation say they, too, have had similar discussions.

As the Post further added, “the catalyst is Jeffrey Smith’s Starboard Value, the activist New York hedge fund. Smith is said to be fed up with Macy’s poor performance since he invested in it in July 2015. Macy’s shares are down nearly 60 percent since then. Smith is angling for seats on Macy’s board, according to several sources, who describe the situation as a looming proxy battle in advance of Macy’s annual meeting, which will likely take place in late April or May.”

Then, moments ago, the WSJ’s Dana Mattioli, who has an infamous “deep throat” source on Goldman’s M&A team, confirmed that indeed Hudson’s Bay is preparing to acquire Macy’s, completing a trifecta of US retailers, including Lord and Taylor and Saks, however she cautions that the talks are in the early stages and may not lead to a deal, especially since “complicating a takeover, Macy’s is saddled with about $7.5 billion in debt.

Some more details from the WSJ:

Hudson’s Bay is an acquisition-hungry owner of marquee names in retail including Lord & Taylor department stores and Saks Fifth Avenue. While its market value is dwarfed by that of Macy’s—$1.8 billion compared with $9.8 billion as of Friday morning—Hudson’s Bay could raise equity and debt against its real estate portfolio, which could be worth $14 billion, one of the people said. It could also bring in a partner.

Macy’s has struggled in recent years amid increasing competition from upstarts and as shopping habits change and consumers buy more over the internet. Its stock has fallen more than 50% from the highest level it reached in 2015. In January, Macy’s said it would slash more than 10,000 jobs and detailed plans to close dozens of stores after another weak holiday-sales season. It’s facing mounting investor pressure to turn around its performance and reverse the stock drop. Starboard Value LP took a stake and a board seat and called on Macy’s to hive off its valuable real estate, which the activist investor says is worth more than $20 billion.

It is unclear if Trump would have any particular objection to having America’s northern neighbor own three of the most valuable and well-known retail brands in the US.

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