It used to be the case that corporate buyouts were cheered by investors. After too many buyout attempts to easily recall, Nordstrom, Inc. (NYSE: JWN) finally has a buyout offer on the table. The buyout proposal may seem a bit complicated for shareholders who have been sticking by the higher-end apparel retailer for years. The real rub is that investors may feel like they are getting a nothing burger here in the buyout. Then again, times are not what they used to be either.
Nordstrom had been the subject of acquisitions and “go-private” discussions for at least two decades. The 2019 deal fell apart and there has been an ongoing review. And something always seemed to interrupt Nordstrom’s attempts at going private.
Oggonomics views this new buyout proposition by the Nordstrom family and an outside group as very unlikely to excite most shareholders. There is just no premium to the deal. The only real reward may be the dividends that Nordstrom has paid over the last decade.
THE DEAL
Nordstrom issued a press release stating that its special committee of the Board of Directors confirmed receiving a proposal from Erik and Pete Nordstrom, other members of the Nordstrom family, and El Puerto de Liverpool, S.A.B. de C.V. (“Liverpool”) in Mexico for the outstanding shares not already held for $23.00 per share. It’s an all-cash offer per share but a 5-year stock chart and a longer-term chart mean that long-term holders who have been patient are simply getting the privilege of the past dividends and the current share price as their exit package.
Shareholders likely have zero anticipation that this stock would ever get back into the $70s and $80’s as had been the case at the peak a decade ago. Maybe this deal sounds good to those who bought around the 52-week low of $12.88. Unfortunately, this is a offer that the special committee has to either decide this is as good as it can get today or worry that the economy is going to tip shares much lower if they don’t take the money now.
If the deal works out the way it is structured, the remaining Nordstrom family members would own 50.1% and Liverpool would own 49.9%. The company’s press release noted that the merger consideration would be financed through a combination of rollover equity and cash commitments by members of the Nordstrom family and Liverpool and $250 million in new bank financing. It also noted that the existing Nordstrom debt to remain outstanding. And the deal comes with the warning disclaimer as well:
There can be no assurance that the Company will pursue this transaction or other strategic outcome, or that a proposed transaction will be approved or consummated. The Company does not intend to disclose further developments regarding this matter unless and until further disclosure is determined to be appropriate or necessary.
WALL STREET’S VIEWS & RATINGS
Barclays was not exactly aggressive to begin with in coverage, but the post-merger news brought an upgrade to Equal Weight from Underweight and the prior target price of $18 was raised to $23 in the call. So Barclays sees the fair value at $18 without a deal. Maybe it’s a decent deal on that count.
The opinion of Jefferies was that this was shown as a fair deal based on current market conditions. Other analysts had just made their price target changes a week earlier:
- TD Cowen (Hold) to $25 from $24.
- Telsey (Market Perform) to $24 from $23.
- JPMorgan (Underweight) to $20 from $19.
- Goldman Sachs (Neutral) to $21 from $19.
- BofA (Underperform) to $20 from $18.
- BMO ((Market Perform) to $22 from $20.
THE HISTORY & THE FUTURE
Nordstrom was founded in 2001, and in the 1960s became more of the larger retailer we have come to know. It has now been a public stock for more than 50 years. The good news for long-term shareholders is that since 2010 it looks like Nordstrom has paid out total dividends of about $18.50. The bad news is that this buyout still represents nothing special.
Whether or not the deal gets done will depend how existing shareholders vote. The Nordstrom family still runs the company and still owns about one-third of the shares. El Puerto de Liverpool is shown to have purchased nearly a 10% stake in Nordstrom back in 2022. On top of its Liverpool and Suburbia brand stores in Mexico, the company also operates franchise locations in Mexico for brands like Gap and Banana Republic, as well as Pottery Barn and Williams
Sonoma.
Nordstrom had a go-private deal $50 per share back in 2019, but the deal failed to materialize. Then came the post-Covid economy of 2020 that wrecked many existing retailers.
IN THE END… SOMETHING FOR MACY’S?
This transaction feels like a merger that is ultimately very hard to get excited about. Then again, the analyst community wasn’t exactly going crazy to issue any grand price targets for the buyout price either. Maybe this is as good as it gets — and maybe Macy’s Inc. (NYSE: M) and its longstanding history of failed merger attempts better pay attention here. It’s possible that this may just be as good as it can get under the present circumstances.
