Nordstrom Family Teams Up with Mexican Retailer to Take Department Store Private
In a bold move, the Nordstrom family has partnered with El Puerto de Liverpool SAB, a prominent Mexican department-store chain, to take the iconic Nordstrom Inc. private in an all-cash deal worth approximately $6.25 billion, including debt.
A New Chapter for Nordstrom
The founding family is betting that the century-old retail chain will thrive without the scrutiny and demands of the public market, which has seen Nordstrom’s shares plummet 40% over the last five years. In contrast, the Russell 1000 Index has risen more than 80% during the same period.
The Deal’s Details
As part of the transaction, expected to close in the first half of 2025, the Nordstrom family and Liverpool will acquire all outstanding common shares of Nordstrom. The Nordstrom family will hold a majority ownership stake of 50.1%, with Liverpool owning 49.9%. Nordstrom common shareholders will receive $24.25 in cash for each share of Nordstrom common stock they hold.
A Smart Move?
Industry experts believe the deal is a shrewd move, given Nordstrom’s subdued growth prospects. The company’s annual revenue, including income from credit cards, peaked at $15.9 billion in 2019 but has yet to return to pre-pandemic highs. By going private, Nordstrom avoids the risk of activist investors pushing for executive changes and can focus on long-term growth.
Avoiding Activist Investors
Erik Gordon, professor at the University of Michigan’s Ross School of Business, notes that Nordstrom’s management has “delivered long-term decline, not long-term value creation.” By going private, the company can sidestep the threat of activist investors and focus on revamping its business.
Department Stores Struggle
Nordstrom is not alone in its struggles. Other department-store chains in the US have faced similar challenges as shoppers increasingly turn to online competitors and brand-specific stores. Macy’s Inc., for example, is shrinking its store fleet to cut costs, while the owners of Saks Fifth Avenue bought Neiman Marcus Group earlier this year.
Nordstrom Rack’s Performance
Nordstrom Rack, the company’s off-price chain, has been a bright spot, with sales bouncing back after a brief stumble. However, its performance has been spotty, and the company has had to adapt to changing consumer behavior.
Financing the Deal
The take-private deal 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 ABL bank financing, and company cash on hand.
A New Era for Nordstrom
The Nordstrom family is optimistic about the deal, with CEO Erik Nordstrom stating, “On behalf of my family, we look forward to working with our teams to ensure Nordstrom thrives long into the future.” The transaction marks a significant milestone for the company, and its customers can expect a new era of growth and innovation.
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