Nordstrom is being taken private in a $6.25 billion cash deal. Is it a good move?

Nordstrom (JWN) is returning to its private roots after years of earnings woes and investor indifference.

The founding Nordstrom family, which owned about 33% of the shares, teamed up with small investor El Puerto de Liverpool, which owned a 10% stake, to take the company private. El Puerto is a real estate and department store conglomerate that, in addition to department stores and retailers of other formats, also operates boutiques with well-known names such as Gap, Banana Republic and Williams Sonoma, among others.

Both will acquire all outstanding shares in an all-cash deal valued at approximately $6.25 billion.

The 123-year-old retailer, based in Seattle, Washington, has 381 locations, including 93 Nordstrom and 280 Rack locations, a growing business for the brand.

After the transaction closes, which is expected in the first half of 2025, the Nordstrom family will own the majority stake. Two-thirds of the company’s shareholders must approve the deal.

Each shareholder receives $24.25 in cash for each share held. The offering price, just a hair above the current share price of $24.19, is a nearly 36% premium to the year-earlier price of $17.78.

Morningstar analyst David Swartz was “disappointed with the final offer, as it is well below” his valuation of $38.50 per share.

In 2018, the company’s board rejected the Nordstrom family’s offer to take the company private for about $50 per share. Net profit fell 76% from 2018 to 2023.

But Swartz expects the deal to go through “at the proposed price” because Nordstrom’s board, including Erik and Pete Nordstrom, unanimously approved the deal and there was “no (apparent) opposition.”

Swartz believes both the Nordstrom family and El Puerto de Liverpool are getting a “good deal,” although he has concerns about the price.

“While we do not expect resistance, we are disappointed that shareholders will not receive a price closer to our previous valuation and believe that the Nordstroms and El Puerto de Liverpool are acquiring Nordstrom at a time when results are poor.” , he added.

Still, he believes that “public shareholders have been unwilling to give high valuations to department store companies.”

The company recently recorded positive growth.

Nordstrom’s same-store sales rose 4% in the third quarter for its namesake brand. Sales at off-price store Nordstrom Rack rose 3.9%.

Analysts estimate Nordstrom’s full-year 2024 revenue at $14.5 billion, slightly higher than last year’s $14.2 billion.

Nordstrom performs better compared to its department store competitors because of the company’s focus on e-commerce. Ashley Helgans, an analyst at Jefferies, said Nordstrom benefited from being “brand first and price second.”

The company has also focused on “enhancing the selection and depth of customers’ favorite brands,” from Deckers’ (DECK) running sneaker brand Hoka and On Holding’s (ONON) performance shoes to dressy and modern men’s clothing brands.

But Nordstrom remains cautious as the company grapples with a shorter holiday season, inconsistent spending habits as the new year begins and an “uncertain” external environment.

“Across all of our businesses … we have seen a slowing trend,” CEO Erik Nordstrom said in an earnings call from the last week of October.

Neil Saunders, managing director of retail at GlobalData, told Yahoo Finance that taking Yahoo Finance private would allow Nordstrom to make long-term decisions without having to respond to public market pressures.

“While a change in ownership does not automatically resolve all problems with the department store operations, it allows the family and its supporters to take a long-term view of the business and make necessary investments and changes without short-term considerations in the public markets,” Saunders said in an email.

He added that the business is not what it once was.

“Many changes and investments are required to address recent missteps in merchandising, operations and store standards. The family has the talent and ability to bring about change, as does El Puerto de Liverpool. “They’re probably going to run the company as a retailer rather than a sort of financial play… which we think is a very positive thing for the long-term health of the brand,” he said.

SAN DIEGO, CALIFORNIA – DECEMBER 5: Shoppers enter a Nordstrom store at the Westfield UTC mall on December 5, 2024 in San Diego, California. (Photo by Kevin Carter/Getty Images) · Kevin Carter via Getty Images

Nordstrom wasn’t alone in its problems.

Macy’s (M), Kohl’s (KSS) and Nordstrom are fighting to stay in the game by closing struggling stores and pouring money into online businesses to compete with the rise of retail giants Amazon (AMZN), Walmart (WMT). and Target (TGT). Added to this is the rise of off-price retailers such as Ross Stores (ROST) and TJX Companies (TJX), which include TJ Maxx and Marshall’s.

“One of the things we have seen in retail in recent quarters is an acceleration in retail division trends between market share winners such as off-price brands and other specific brands that have novelty and innovation and are competing quite favorably.”, and a tougher trend for department stores overall,” Brooke Roach, vice president at Goldman Sachs, told Yahoo Finance.

—

Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected].

Click here to get the latest retail stock news and events to better inform your investment strategy

Breaking News

Dellupodisabato

Nordstrom is being taken private in a $6.25 billion cash deal. Is it a good move?

Leave a Reply Cancel reply