Nordstrom’s founding family has made a significant move to regain control of the iconic department store chain by offering to take Nordstrom private at $23 per share. This latest Nordstrom privatization offer values the company at approximately $3.76 billion. The bid, filed on Wednesday, includes CEO Erik Nordstrom, President Peter Nordstrom, and Mexican retailer El Puerto de Liverpool, who have teamed up to form a new entity that will buy out Nordstrom.
This offer represents a major step in the Nordstrom family’s ongoing efforts to steer the company in a new direction amid declining sales and changing market conditions. Shares of Nordstrom (NYSE:JWN) have surged 35% since reports surfaced in March about the family’s interest in taking the company private.
Nordstrom Privatization Offer: A Bid to Retain Control
The Nordstrom privatization offer comes as the department store faces challenges similar to those encountered by other major retailers. The founding Nordstrom family, which owns nearly 44% of the company, has previously attempted to privatize Nordstrom, most notably in 2018, when they offered $50 per share. That offer was rejected by Nordstrom’s board, and discussions ceased after failing to agree on valuation.
However, this new bid reflects the evolving retail landscape. The $23 per share offer is notably lower than the 2018 proposal, signaling that the Nordstrom family seeks to take advantage of the company’s current lower valuation and profitability. Morningstar analyst David Swartz commented on the move, stating, “The group is buying the company at a time when profitability is low and the valuation is low.”
Swartz further noted that the offer underscores the Nordstrom family’s determination to maintain control of the company as it works through its turnaround strategy.
Partnership Offer with El Puerto de Liverpool
A significant aspect of this Nordstrom privatization offer is the involvement of El Puerto de Liverpool, a Mexican luxury department store chain that first acquired a stake in Nordstrom in 2022. This partnership previously led the Nordstrom family to invoke a “poison pill” defense, but the two parties have now aligned their interests in pursuit of taking Nordstrom private.
Liverpool’s expertise in high-end retail could play a pivotal role in shaping Nordstrom’s future as it continues to focus on stocking trendier products, a move that has already helped it outperform competitors like Macy’s (NYSE:M) and Kohl’s (NYSE:KSS) in recent quarters.
Funding the Deal Privatization Offer
To finance the Nordstrom privatization, the deal will involve a combination of rollover equity and cash contributions from the Nordstrom family and El Puerto de Liverpool. Additionally, the group plans to secure $250 million in new bank financing to support the transaction. The offer is currently non-binding, and the Nordstrom family is reportedly in discussions with other third parties that could alter the current terms.
The structure of the bid reflects the Nordstrom family’s long-term vision for the company, leveraging its strong legacy while adapting to shifting market challenges.
Challenges and Uncertainty Surrounding the Offer
Despite the Nordstrom family’s determination, analysts are divided on the attractiveness of the Nordstrom privatization offer. Swartz expressed skepticism about the potential for a higher bid, stating, “I don’t think this is a very attractive offer… and I don’t know if they have the ability to offer a much higher price without bringing in another partner.”
This hesitation reflects broader uncertainty in the retail sector, where traditional department stores like Nordstrom face pressures from e-commerce, changing consumer preferences, and economic fluctuations. However, the family’s offer signals confidence in Nordstrom’s ability to navigate these challenges and reshape its future.
Sycamore Partners’ Competing Offer Interest
In addition to the Nordstrom family’s offer, private equity firm Sycamore Partners has also shown interest in taking the company private, according to a report by Reuters in May. This development could introduce additional complexity to the privatization process. Whether Sycamore Partners will submit a competing bid or join forces with the Nordstrom family and Liverpool remains to be seen.
Conclusion: What’s Next for Nordstrom?
The Nordstrom privatization offer represents a bold move by the founding family to regain full control of the company at a time when the retail industry is undergoing significant transformation. The partnership with El Puerto de Liverpool brings valuable resources and expertise, positioning Nordstrom to refine its strategy and remain competitive in a challenging market.
However, questions remain about whether the current offer is sufficient to secure a deal or if other bidders, such as Sycamore Partners, will emerge. As Nordstrom navigates these uncertainties, the outcome of this privatization bid will have important implications for the company’s future direction, employees, and stakeholders.
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