After a failed attempt, Nordstrom's founding family has struck a $6.25 billion deal to take the troubled department store chain private, partnering with a Mexican retailer to acquire the company.
Erik, Pete, Jamie Nordstrom and other members of the Nordstrom family and El Puerto de Liverpool have signed a definitive agreement to acquire all the company's shares that they don't already own in an all-cash transaction. Following the close of the deal, the Nordstrom family will have a majority ownership stake in the company, Nordstrom said Monday.
Nordstrom CEO Erik Nordstrom and President and Chief Brand Officer Pete Nordstrom are the great-grandsons of the chain's founder, John Nordstrom. They unveiled their plan to join with El Puerto de Liverpool to acquire the retailer in September. It's the family's second attempt to take the company private since 2017. Nordstrom formed a committee of independent directors in April after the brothers expressed interest in making a deal for the company.
The department store sector has been hit especially hard in recent years, with malls seeing dips in traffic, and competition from e-commerce, discounters and off-price retailers. Sears and J.C. Penney filed for Chapter 11 protection, Lord & Taylor was liquidated and Macy's has been maneuvering to bolster its lagging sales, closing underperforming stores as part of that process. Kohl's just replaced its CEO and Nordstrom has been caught up in these department store doldrums.
"For over a century, Nordstrom has operated with a foundational principle of helping customers feel good and look their best," Erik Nordstrom said in a statement. "Today marks an exciting new chapter for the business. On behalf of my family, we look forward to working with our teams to ensure Nordstrom thrives long into the future."
A new offer
In the fall the Nordstrom brothers offered $23 per share to buy the company shares they don’t already own. The signed sales agreement increases that offer to $24.25 in cash. The deal represents a premium of roughly 42% to the company's unaffected closing common stock price on March 18, the last trading day prior to media speculation regarding a potential transaction. In addition, the board intends to authorize a special dividend of up to 25 cents per share, contingent on the close of the transaction.
The deal, expected to close in the first half of next year, is valued at about $6.25 billion on an enterprise basis, according to Nordstrom.
Nordstrom's store fleet has 350 locations. El Puerto de Liverpool operates across Mexico with 310 stores under the Liverpool and Suburbia banners, 119 specialized boutiques as well as 29 shopping centers.
"While a change in ownership does not automatically remedy all of the problems with the department store operation, 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," Neil Saunders, a retail analyst and managing director of analytics firm GlobalData, said in a note Monday.
"Nordstrom has, by no means, been one of the weakest performers in the department store space," Saunders said. "However, neither is it the business that it once was, and a lot of change and investment is needed to remedy recent missteps with merchandising, operations and store standards. The family have the talent and ability to enact change as does El Puerto de Liverpool. They will likely run the business as a retailer rather than as some kind of financial plaything which, in our view, is a very positive thing for the long-term health of the brand."
Deal details
Nordstrom didn't immediately respond to an email from CoStar News seeking comment on Saunders' remarks.
The transaction will be financed through a combination of rollover equity by the Nordstrom Family and Liverpool, cash commitments by Liverpool, up to $450 million in borrowings under a new $1.2 billion bank financing and company cash on hand. The company's $2.7 billion principal amount of existing senior notes and debentures are expected to remain outstanding following the transaction.
As part of the transaction, Nordstrom expects to take actions to secure the company's existing senior notes and debentures with a second lien on the business's current assets and related collateral and a first lien on the company's other assets — excluding real estate — conditioned and effective upon the transaction closing. Following the closing of the transaction, Nordstrom will be owned 50.1% by the Nordstrom family and 49.9% by Liverpool.
Upon completion of the transaction, Nordstrom's common stock will no longer be listed on any public market.
For the record
Morgan Stanley & Co. and Centerview Partners are acting as financial advisers to the special committee, and Sidley Austin and Perkins Coie are acting as legal counsel to the special committee.
Moelis & Co. is acting as financial adviser and Wilmer Cutler Pickering Hale and Dorr, Lane Powell and Davis Wright Tremaine are acting as legal counsel to the Nordstrom Family.
J.P. Morgan Securities is acting as financial advisor and Simpson Thacher & Bartlett and Galicia Abogados are acting as legal counsel to Liverpool.