Nordstrom Family Proposes $3.76 Billion Buyout of Historic Department Store

The Nordstrom family, in collaboration with a Mexican retail group, is proposing to take the well-known department store private for $3.76 billion. This offer comes several months after the family initially expressed interest in purchasing the company.

In correspondence to the company’s board of directors, Erik Nordstrom revealed that the family members own approximately 33.4% of Nordstrom’s outstanding common stock. They are prepared to pay investors $23 for each share they hold.

Analyst Neil Saunders, managing director of GlobalData, stated that the bid was anticipated. He noted that the offered price of $23 per share closely aligns with the stock’s current value. “The absence of a substantial premium would typically render the offer less appealing,” he explained. “However, as this is a family-run company, the dynamics can differ, leaving it to an independent committee to assess whether this is in the best interests of both the company and its investors.”

The Mexican retail group involved, El Puerto de Liverpool, operates over 300 stores across Mexico and is the country’s third-largest credit card issuer with more than 7.2 million active accounts. This group currently holds about 9.6% of Nordstrom’s stock.

Notably, the offer represents a nearly 35% premium compared to Nordstrom’s stock value since March 18, although shares have been trading slightly above $23 as of Wednesday.

According to Saunders, while the Nordstrom family’s proposal to acquire the department store chain is not unexpected, the offered $23 per share—aligning with the stock’s trading price—does raise questions. “The lack of a tangible premium would typically render the offer less favorable. Still, in a family-operated business, the situation becomes more nuanced, and it’s up to the independent committee to decide what’s best for all parties involved,” he stated.

In the second quarter, Nordstrom reported a sales growth of 3.4%, with comparable store sales increasing by 1.9%. However, net income saw a nearly 11% decline to $122 million, despite adjusted earnings per share coming in at 96 cents and overall results surpassing analyst expectations. The company not only operates its high-end stores but also features Nordstrom Rack discount outlets, which have shown promising growth.

Sales at Nordstrom Rack surged by 8.8% in the latest quarter, with comparable sales increasing by 4.1%. Saunders remarked, “The offer is arriving at a time when Nordstrom appears to be regaining its footing following a prolonged phase of underperformance. Nevertheless, the business’s structure presents challenges, particularly within the department store segment, contrasting with the positive growth seen in the off-price Rack division.”

The Nordstrom brothers, Erik B. and Peter E., represent the fourth generation of leadership for the retailer. Founded in 1901 originally as a shoe store, Erik currently serves as the chief executive, while Peter holds the position of president. The family’s regulatory filing indicated that their late father, Bruce Nordstrom, played a significant role in motivating the proposed acquisition. Bruce, who passed away at 90 years old in May, had been a former chairman of the company.

The Nordstrom family and their partner have announced that they have secured commitments for $250 million in new bank financing to support this venture.

Nordstrom, headquartered in Seattle, has acknowledged the receipt of the buyout proposal and informed that a special committee, which had been set up in April, will review the offer.

Shares of Nordstrom have risen by 27% this year, increasing slightly to $23.16 on Wednesday.