Nordstrom Returns to Private Roots in $6.25 Billion Deal
After years of struggling to impress investors and posting lackluster earnings, Nordstrom is going back to its private roots. The founding Nordstrom family, who own approximately 33% of the company, have teamed up with retail investor El Puerto de Liverpool, owner of a 10% stake, to take the company private in an all-cash deal valued at around $6.25 billion.
A New Chapter for the 123-Year-Old Retailer
The deal, expected to close in the first half of 2025, will see the Nordstrom family gain a majority ownership stake. El Puerto de Liverpool, a real estate and department store conglomerate with boutiques featuring well-known brands like Gap, Banana Republic, and Williams Sonoma, will also acquire all outstanding shares. Nordstrom operates 381 locations, including 93 Nordstrom and 280 Rack locations, which have been a growing business for the brand.
A Premium Offer, But Not Without Its Critics
Each shareholder will receive $24.25 cash for each share held, a nearly 36% premium to where shares started the year at $17.78. However, Morningstar analyst David Swartz expressed disappointment with the final offer, citing it was well below his $38.50 per share valuation. Despite this, Swartz expects the deal to go through, given the unanimous approval from the Nordstrom board of directors and the lack of opposition.
A Brighter Future Ahead?
Nordstrom has been posting positive growth recently, with its third-quarter same-store sales growing 4% for the namesake brand and 3.9% for its off-price business, Nordstrom Rack. Analysts estimate the company’s full-year fiscal 2024 sales at $14.5 billion, slightly more than the previous year. By going private, Nordstrom will be able to make long-term decisions without the pressure of the public market, allowing it to focus on improving its operations and investing in its brand.
A Challenging Retail Landscape
Nordstrom is not alone in its struggles. Department stores like Macy’s and Kohl’s are also fighting to stay relevant in a rapidly changing retail landscape. The rise of off-price retailers and retail behemoths like Walmart and Target has forced traditional department stores to adapt and innovate to stay competitive.
A New Era of Investment and Growth
Going private will give Nordstrom the opportunity to make necessary investments and changes without the scrutiny of the public market. With the talent and ability of the Nordstrom family and El Puerto de Liverpool, the company is poised for a brighter future. As GlobalData’s managing director of retail Neil Saunders noted, “The family have the talent and ability to enact change… which, in our view, is a very positive thing for the long-term health of the brand.”
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