Nordstrom family group finalizing take-private offer, but meets rejection

Nordstrom Inc’s (JWN.N) founding family group is finalizing plans to submit an offer to take the U.S. department store operator private, people familiar with the matter said on February 23, 2018

Nordstrom is about to receive the offer as it prepares to report fourth-quarter earnings on March 1 and update investors on its financial performance during the key holiday season. Nordstrom’s stock has risen close to 30 percent since Thanksgiving, on investors expectations of solid profits.

The group met with investment banks last week and is hoping to submit an offer as early as next month once the banks get approval from their credit committees to provide the financing, the sources said. Details of the offer could not be learned.

The sources asked not to be identified because the deliberations are confidential. Nordstrom declined to comment. A representative for the Nordstrom family also declined to comment.

Nordstrom shares rose 7 percent on the news to USD 53.74 on Friday, giving the company a market capitalization of close to USD 9 billion.

The Nordstrom family group, which has partnered with buyout firm Leonard Green & Partners LP, had suspended its attempt to take the company private in October because of difficulties in arranging debt financing for its bid ahead of the key holiday shopping season.

Investment banks at the time balked at providing the debt financing required for the bid of between USD 7 billion and USD 8 billion on terms that the family group wanted, sources said at the time.

Nordstrom announced in June that the family group, which owns 31.2 percent of the storied retailer, was considering taking the company private. Sources said at the time the family believed it could better manage the company’s operational restructuring and transition to e-commerce away from the public markets.

Nordstrom has formed a special committee of its board of directors to consider any offer received from the family group.

Nordstrom said last month that comparable sales rose 1.2 percent in the nine weeks ended Dec. 30 compared with the same period last year, helped by growth at its off-price discount chain Nordstrom Rack and online businesses. The department store chain slightly raised its full-year earnings forecast at the time to USD 2.90- USD 2.95 per share from USD 2.85-USD 2.95 per share.

Nordstrom’s rival Hudson’s Bay Co (HBC.TO), owner of the Saks Fifth Avenue and Lord & Taylor retail chains, also explored going private last year, though these considerations did not progress.


Nordstrom rejects family’s USD 50-a-share take-private offer, threatens to terminate discussions

The Nordstrom family offered USD 50 a share to buy the retailer and take it private. A special board committee rejected the offer as “inadequate.”

Nordstrom family members offered USD 50 a share to buy out their namesake retailer and take it private, but a board of directors committee curtly rejected the price Monday as “inadequate.”

The offer, valuing the company co-founded in 1901 by John W. Nordstrom at USD 8.35 billion, was USD 3 below the per-share price of Nordstrom’s stock at the close of trading on Friday, a day after the company reported strong quarterly sales but disappointing profits.

The family group noted in a regulatory filing that the USD 50 price tag represents a 24 % premium to the company’s USD 40.48 share price on June 7, 2017, the day Nordstrom family members took their first public steps toward buying out the company.

Financial analysts noted that company values across the retail sector have increased since last summer, due to the continuing strength of the economy and improved consumer outlook in light of the tax cuts.

The family, in a letter to the special Nordstrom board committee, convened to represent shareholders, and entertain offers, described the contemplated transaction as “an attractive outcome” for the company, and various stakeholder groups, adding: “A transaction would ensure that the Company has the flexibility to successfully navigate a challenging retail landscape at a critical time when the public market for retail stocks is highly volatile and increasingly focused on short-term results and risks.”

While the family suggests the deal would allow shareholders to “avoid these risks inherent in the current changing retail environment,” the offer – coming in lower than the recent share price — appears to have rankled the special board committee.

In a statement Monday (March 5) afternoon, the committee said it had directed its financial advisers and company management “not to provide further due diligence information to the Nordstrom family Group.”

The statement continued, “Furthermore, unless the Group can promptly and substantially improve the price it is proposing to pay for the Company, the Special Committee intends to terminate discussions.”

Nordstrom shares fell USD 1.14, or 2.2 % on March 5, to USD 51.90, and fell a further USD 1.30, or 2.5 %, in after-hours trading.

The family ownership group includes Nordstrom’s most senior executives — the same people tasked with guiding the company’s transition from a retailer known for high-touch service in tony department stores to one that serves customers online equally well. Executives said last week that billions of dollars invested in that and other efforts over the last half-decade will begin to pay off in expanding profit margins this year.

The group includes co-presidents Blake W. Nordstrom, Peter E. Nordstrom, and Erik B. Nordstrom, president of stores James F. Nordstrom, chairman emeritus Bruce A. Nordstrom, and Anne E. Gittinger. Together, the group owns about 31.3 % of Nordstrom’s stock.

In the filing, the family group described the USD 50-per-share price as “an indication of the price that they would anticipate being willing to offer … subject to finalizing financing.” It is not a formal proposal, however, and the family says it would have preferred to wait until it had secured financial commitments before responding to the special committee’s request for an indicative price.

The group outlined a potential financing package that would cash out 10 million shares at the take-private price. The rest of their holdings, worth approximately USD 2 billion, would convert into the Nordstrom family’s share of the newly private company. The family said it has secured equity financing of USD 1.5 to USD 2 billion from Leonard Green & Partners, a Los Angeles-based private equity firm, and is also in “active discussions with several alternate capital providers.”

Further, the family group said that in late February it received proposals from major lenders for up to USD 7.5 billion in debt, subject to advisory ratings from credit rating agencies, which it intends to pursue in the next three weeks.

The Nordstrom family had paused its efforts to arrange financing last fall, as debt financing in the tumultuous retail industry proved hard to come by. But Nordstrom passed through the holiday shopping season with strong growth in sales, and received a generally positive reception for its plans to more fully unite the digital and physical sides of its business beginning with its largest market, Los Angeles, this year.

Robert W. Baird & Co. analyst Mark Altschwager said in a note to investors on March 5, that Nordstrom stands out from other retailers in its category and warrants a price premium. “We’re not all too surprised to see the board’s Special Committee reject the USD 50/share indicative proposal,” Altschwager wrote.