Macy’s shares dropped more than 14% on Monday morning following the retailer’s announcement that it was ending its partnership with two investment funds attempting to acquire the company.
The funds, Arkhouse Management and Brigade Capital Management, had initially made a $5.8 billion buyout offer in December. Macy’s CEO Tony Spring stated, “Our team continues to be singularly focused on creating value for our shareholders. While it remains early days, we are pleased that our initiatives have gained traction, reinforcing our belief that the Company can return to sustainable, profitable growth, accelerate free cash flow generation and unlock shareholder value.”
In April, Macy’s began collaborating with the funds after they raised their offer to $6.6 billion and even allocated two board seats to them. However, the remainder of the board found the financing behind the offer insecure and believed that Arkhouse-Brigade did not have a sufficient plan for the company’s future.
Macy’s has been working to revamp its operations amid significant challenges posed by shifts in the retail environment, including the decline of traditional malls and competition from Amazon. The company unveiled a reorganization strategy called “A Bold New Chapter” shortly after the Arkhouse-Brigade takeover attempt, focusing on simplifying operations by closing stores and targeting higher-end customers.
“The Board unanimously determined that the latest Arkhouse and Brigade proposal remains non-actionable and fails to provide compelling value to Macy’s, Inc. shareholders,” the company stated. “The Board believes that continuing diligence is not warranted or in the best interests of shareholders given: 1) the significant uncertainty that Arkhouse and Brigade’s financing could or would ultimately be completed given the substantial conditionality in their financing papers; 2) the less than compelling value proposed; and 3) the significant distraction for the management team at a critical point in the execution of the Company’s strategy.”