Macy’s shares dropped over 14% on Monday morning after the retailer announced it was ending its collaboration with two investment funds attempting a takeover.
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Macy’s revealed it is ceasing its partnership with Arkhouse Management and Brigade Capital Management, which had made a $5.8 billion buyout offer in December.
“Our team remains laser-focused on creating value for our shareholders,” said Macy’s CEO Tony Spring. “Although it’s still early, we are encouraged by the traction of our initiatives, supporting our belief that the company can achieve sustainable, profitable growth, accelerate free cash flow generation, and enhance shareholder value.”
Macy’s began collaborating with the funds in April after they increased their offer to $6.6 billion, even allowing the two investment groups representation on its board. However, the rest of the board decided that the financing behind the offer was not secure and that Arkhouse-Brigade lacked a strong plan to advance the company.
Macy’s has been attempting to turn its fortunes around after years of difficulty adapting to a retail landscape dominated by e-commerce and declining mall traffic. It unveiled a reorganization strategy called “A Bold New Chapter” a few months after the Arkhouse-Brigade takeover proposal. This strategy focuses on simplifying operations by closing stores and targeting higher-end customers.
“The Board unanimously determined that the latest proposal from Arkhouse and Brigade remains non-actionable and does not offer compelling value to Macy’s, Inc. shareholders,” the company stated. “The Board concluded that continuing due diligence is not justified or in shareholders’ best interests given: 1) the significant uncertainty surrounding the financing from Arkhouse and Brigade; 2) the less than compelling value proposed; and 3) the major distraction for the management team at a critical point in executing the Company’s strategy.”