Major upscale department store goes private in $6.25 billion deal

A major American department store chain is going private in a $6.25billion deal that will see its founding family regain control.

Executives at Nordstrom announced Monday that Erik, Pete and Jamie Nordstrom, as well as Mexican department store chain El Puerto de Liverpool, will acquire all of the remaining shares they do not own - giving the family a majority ownership, CNN reports. 

Shareholders will be reimbursed $24.25 for each share, which is about a 42 percent premium on the stock based on the price as of March 18, 2024, when speculation about the company being taken private first began.

The company said it would also authorize a special divided of up to 25 cents per share if the transaction closes, according to the New York Times.

'For over a century, Nordstrom has operated with a foundational principle of helping customers feel good and look their best,' CEO Erik Nordstrom said.

'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.'

Shares of the department store fell more than a percentage point following the news, closing Monday at $24.17, but were still up more than 30 percent for the year as the company maintained a market value of a little over $4billion, according to the Wall Street Journal.

Yet, its shares have been languishing for years, after reaching a peak of nearly $15billion nearly a decade ago.

Then, when the Nordstrom family tried to take their namesake department store private in 2018, they offered shareholders $50 per share - but at the time, the board said that was too low of a price.

Much, if not all, of the decline could be attributed to consumers cutting back on discretionary spending following the pandemic and shifting their habits to purchase more items online.

Other department stores have also been feeling the strain, with Macy's coming under pressure from an activist investor to sell off some of its real estate properties - potentially including its flagship New York City store.

The investors also asked Macy's to sell Bloomingdale's and Bluemercury, which operate under its banner.

They believe its real estate, which they value at $5 billion to $9 billion is worth more than the department store's retail operations.

With that in mind, Wall Street analysts have praised Nordstrom for its privatization plan.

Neil Saunders, managing director of GlobalData, for example, wrote that the family and El Puerto de Liverpool have the ability to 'make necessary investments and changes away from the short term scrutiny of public markets.

'They will likely run the business as a retailer rather than as some kind of financial play thing, which, in our view, is a very positive thing for the long term health of the brand.' 

Morningstar senior equity analyst David Swartz also said he believes 'it's a very good deal for the buyout group,' saying the department store is 'undervalued at this price.'

'I also understand that there's a reason why Nordstrom probably should go private, and that's because investors just are not giving good valuations to department store companies right now,' he said.

Swartz then went on to say that as the department store opens more Nordstrom Rack locations 'that's really probably the future of the company, even though Rack is smaller than the main Nordstrom stores.

'But Rack is probably better positioned for the type of retail market that we have today,' he said.

The deal is expected to close in early 2025, but first it has to be approved by two-thirds of the company's common stockholders.