In a $6.25 billion agreement, the Nordstrom family and a Mexican retail business agreed to buy and take private the century-old department store. The industry is being squeezed by bargain stores and other competitors.
If Nordstrom is private, they might have more freedom to revive a department store business that has been trying to boost sales for years, but public companies are subject to much more scrutiny.
As of March 18, when the media began reporting on a possible deal, Nordstrom stockholders will receive $24.25 in cash for each share of Nordstrom common stock, or roughly $4 billion in total. This represents a 42% premium on the company’s value.
Additionally, Nordstrom’s debt of over $2 billion will be acquired by the acquiring company.
Amazon.com, a number of fast-fashion bands, and giants like Walmart and Target have all become fiercer competitors of traditional department stores, causing them to suffer. Major investors have put pressure on Nordstrom’s competitors, Macy’s and Kohl’s, to make significant adjustments in order to increase shareholder profits.
Over the last ten or so years, Nordstrom’s sales have practically stagnated, and the company last year announced that it was closing all of its stores in Canada and laying off 2,500 employees as it winds down operations in the nation. In 2012, Nordstrom first declared its intention to build stores in Canada. In September 2014, it opened its first location in Calgary at the CF Chinook Centre.
The offer presented on Monday surpasses the previous September offering of $23 per share made by the Nordstrom family and El Puerto de Liverpool, a Mexican retail firm.
Depending on Nordstrom’s cash on hand right before the transaction closes, the board also intends to approve a special dividend of up to 25 cents per share.
The company’s shares will no longer be traded publicly after the sale closes, which is anticipated to happen in the first half of 2025.
According to a note sent to clients by Neil Saunders, Managing Director of GlobalData, “A change in ownership does not automatically remedy all of the problems with the department store operation, but it will allow the family and their backers to take a long-term view of the business and make necessary investments and changes away from the short-term scrutiny of public markets.”
The planned deal was unanimously authorized by the Nordstrom board of directors, however Erik and Pete Nordstrom, who are part of the Nordstrom family that will take over the company, abstained from voting.
The Nordstrom family will own a majority ownership share in the business after the deal closes.
Founded as a shoe store in 1901, the Seattle firm is led by Erik and Pete Nordstrom, who are in their fourth generation. Peter is the company’s president, and Erik is its chief executive.
The corporation now runs 381 Nordstrom and Nordstrom Rack stores in the United States, having opened 23 new locations so far this year.
Despite being up 34% this year, Nordstrom’s stock dropped roughly 1.5% on Monday due to suspicions of a family takeover. The stock of the corporation has yet to recover significantly from its post-pandemic peak of over $40 per share.
Bruce Nordstrom, a retail executive who helped turn his family’s chain of department stores in the Pacific Northwest into a high-end national brand, passed away in May of this year at the age of 90. He was among a number of Nordstrom family members who, in 2017, suggested buying out the 70% of the department store’s stock that they did not already hold in an attempt to take the business private. His sons began another round of buyout talks earlier this year, which resulted in Monday’s news, after those talks failed in 2018.
The Associated Press
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