Nordstrom's founding family is offering to take the company private for the second time since 2017 as some retailers struggling to boost profits look at monetizing their real estate and other strategies.
CEO Erik Nordstrom and President Pete Nordstrom, the great grandsons of founder John Nordstrom, offered $23 per share to buy the company shares they don’t already own in a proposal that values the Seattle-based company at just under $3.8 billion, according to filings.
In the latest bid, the brothers joined with other family members and Mexican retailer El Puerto de Liverpool, a chain that has owned a nearly 10% stake in Nordstrom since 2022.
Department stores have faced slipping sales and shifting shopping patterns, prompting some executives and investors to propose deals to take chains private and other strategies. Chains like Macy's, Kohl's, Nordstrom and Saks Fifth Avenue face heightened competition from discounters, off-price retailers, online sellers and luxury-goods makers.
An effort by activist investors to take Macy’s private failed when the company rejected several offers before ending buyout talks with the dissidents in July. Macy’s executives have pivoted to a turnaround plan announced this year that includes closing stores and selling surplus properties. The company recently reported that strong interest in the real estate that it put back on the market will allow the chain to close and sell five more stores than originally planned.
The Nordstrom move could potentially lead to a similar assessment of the real estate value of the chain’s 350 physical locations, including its downtown Seattle flagship department store at 500 Pine St., discount Rack stores and other holdings.
Second go-private bid
For the second time since 2017, the publicly traded company formed a committee of independent directors in April after the brothers expressed interest in making a deal for the company.
Nordstrom's first plan to go private failed when the special committee in 2018 turned down a $50-per-share bid organized by the family, claiming that the bid was inadequate, according to company filings.
Nordstrom would finance the most recent bid with equity and cash from family members and El Puerto de Liverpool, the operator of more than 300 stores in Mexico.
The proposal also includes $250 million in bank financing. If the offer goes through, Nordstrom would be 50.1% owned by the family and 49.9% by Liverpool, filings show.
While the family’s most recent offer to buy back the chain comes as no surprise, the value of the proposal — roughly equal to the company's current stock price — could make the deal unattractive to the Nordstrom committee, Neil Saunders, managing director of analytics firm GlobalData, said in an e-mail.
"However, the involvement of El Puerto de Liverpool in the deal may mean there is potential to push the price higher, something the committee may well consider," Saunders said.
The offer comes at a time when Nordstrom is trying to get back on track after a long period of poor sales, Saunders said.
Sales at the chain's flagship department stores declined 3% in the important fourth quarter of last year during the holidays, even as sales at Nordstrom Rack stores rose by 15%, according to company financial data.
The company in its most recent quarterly earnings reported sales growth driven by its off-price Rack business. Nordstrom's total revenue rose to $3.34 billion in the most recent quarter from $3.2 billion in the prior period.