The Nordstrom family, alongside Mexican retailer El Puerto de Liverpool, has finalized a monumental $4 billion deal to take the iconic department store chain Nordstrom private, marking the company's return to its roots and providing fresh opportunities for growth.
The acquisition, announced at $24.25 per share, values the retailer at approximately $6.25 billion when existing debts are factored in. This deal is particularly notable as the Nordstrom family had attempted to privatize the company nearly seven years ago with an $8.4 billion offer, which was rejected at the time. Now, following renewed interest from CEO Erik Nordstrom and President Pete Nordstrom, the company's board has approved the move after forming a special committee to evaluate the proposal.
Analysts recognize this decision not just as an ownership change but as part of broader trends affecting the retail industry. With sales continually pressured under inflation, rising costs, and fierce competition from e-commerce giants like Amazon, the need for flexibility and long-term strategy beyond the scrutiny of public markets has become urgent.
Suzy Davidkhanian, an analyst at eMarketer, highlighted the significance of Liverpool's involvement, stating, "Partnering with Liverpool should assure shareholders about the company's future decisions." Liverpool, which owned 9.6 percent of Nordstrom prior to the deal, will gain substantial influence, including one seat on the board, allowing them to shape future strategic decisions.
For the Nordstrom family, led by Erik and Pete Nordstrom, both descendants of the brand's founder John Nordstrom, taking the company private is seen as pivotal. The family owned 33.4 percent of Nordstrom before the agreement with Liverpool, and they will now hold 50.1 percent of the newly privatized company. This ownership shift grants them more control over the direction of Nordstrom, which has experienced significant struggles recently, including share prices declining by 70 percent since 2015 and total sales sinking from $15.08 billion to $14.22 billion over the past year.
The stakes were laid out clearly when the board evaluated the proposed buyout. According to Eric Sprunk, chairman of the special committee and former COO of Nike, "Following a rigorous and independent evaluation and consultation with outside financial and legal advisors, the special committee unanimously concluded this transaction offers greater value for all public shareholders at a significant premium to the unaffected share price." Such strong endorsements not only highlight the financial acumen of the family but suggest deep trust from the retail community as well.
Notably, the deal holds substantial financial intricacies. It will be financed through equity contributions, cash commitments from Liverpool, and up to $450 million in borrowings under a broader asset-backed loan of $1.2 billion. This multifaceted financing is intended to stabilize the company, helping it build on its new ecommerce strategies.
Indeed, Nordstrom's ecommerce divisions are thriving and remain foundational to its growth strategy moving forward. Currently positioned as the 23rd largest online retailer in North America, Digital Commerce 360 projects Nordstrom’s online sales will reach $5.28 billion by 2024. This digital performance will be key to sustaining relevance amid changing consumer habits.
Recently, Nordstrom has made efforts to broaden its online offerings with the launch of new marketplace capabilities on its website. This strategic shift is seen as part of their commitment to enhancing customer experience and ensuring they can compete significantly online.
Critically, the Nordstrom Rack division has been pivotal. The low-cost alternative has become more accessible, and since the beginning of 2024, Nordstrom has opened several new Rack stores with plans for expansion continuing through 2025. The retailer's ability to innovate, such as launching the buy online, pick up in-store option at more than 100 locations, showcases its adaptability and dedication to enhancing customer service.
With the deal expected to close by the first half of 2025, it will surely be watched closely by industry analysts and competitors alike. Analysts like David Swartz from Morningstar foresee the transaction proceeding without heavy resistance, leaving the Nordstrom family and Liverpool to refocus on revitalizing the retail giant.
The transition to privatization marks not just a financial restructuring but could signify the dawn of new strategies for growth and renewed market presence for Nordstrom. Soon, the Nordstrom family will lead their storied brand through what could be one of its most transformative chapters yet—free from the pressures of public reporting and with renewed vigor to tackle modern retail challenges.
