The iconic department store chain Nordstrom Inc. is set to transition to private ownership with the announcement of an all-cash acquisition valued at approximately $6.25 billion. The deal, announced on December 23, 2024, marks the Nordstrom family's rebound and confidence at revamping the century-old retail giant away from the harsh scrutiny of public shareholders.
Under the terms of the transaction, Nordstrom shareholders will receive $24.25 for each share they hold, representing nearly a 42% premium over the stock's closing price just before speculation of the deal arose on March 18, 2024. This strategic move is seen as the Nordstrom family—led by Erik, Pete, and Jamie Nordstrom—joining forces with Mexican retailer El Puerto de Liverpool, which will hold 49.9% of the company, whereas the Nordstrom family will acquire majority control at 50.1%.
The deal, which is expected to close by the first half of 2025, is financed through various means, including rollover equity from both the Nordstrom family and Liverpool, cash commitments by Liverpool, and borrowings under new asset-based financing. Alongside this, the company plans to pay out special dividends contingent on the deal closing.
Nordstrom has seen its share prices fluctuate dramatically over the years, indicating turbulent times for the retailer. The department store has faced significant declines, with shares plummeting approximately 40% over the last five years as consumers increasingly turned to online shopping giants like Amazon and discount retailers such as TJ Maxx.
Historically, Nordstrom's presence has been formidable, boasting annual revenue peaking at $15.9 billion during the fiscal year ending February 2019. The company had high hopes for its off-price chain, Nordstrom Rack, intended to bolster growth amid changing consumer habits. Yet, the performance oscillated, prompting executives to rethink strategies.
“A lot of change and investment is needed to remedy recent missteps with merchandising, operations, and store standards,” noted Neil Saunders, Managing Director of GlobalData. He suggests this private acquisition could allow the family to enact necessary reform without the pressure of quarterly earnings disclosures.
The Nordstrom family's earlier attempts to take the retailer private saw them offer $50 per share back in 2017, but the board rejected the proposal as too low at the time. Since then, the board has made significant shifts, reflected not only by the 2024 acquisition attempt but also by the broader struggles of brick-and-mortar department stores. Executives at Macy’s and Saks Fifth Avenue have also undertaken drastic moves to adapt to the dynamic retail climate, indicating structural changes are necessary across the industry.
“Today marks an exciting new chapter for the business. On behalf of my family, we look forward to working with our teams to assure Nordstrom thrives long Into the future,” Erik Nordstrom stated following the acquisition announcement. His optimism about Nordstrom’s potential resurgence reflects the overall sentiment within the company. The leadership hopes to restore the brand's esteemed legacy, focusing on customer experience and service delivery.
El Puerto de Liverpool, which runs Mexico's retail operations, has expressed enthusiasm about the partnership, seeking to leverage its market experiences to reignite growth for Nordstrom. Headed by the Guichard family, the Mexican chain is no stranger to the retail sector, with over 300 stores throughout Latin America, and brings valuable insights as the industry faces pressures to pivot and innovate.
Post-acquisition, analysts expect enhanced strategic decision-making powers for the Nordstrom leadership, facilitating more effective responses to consumer shifts and demands without the overhead of public market pressures. This outlook corresponds with trends indicating more retailers recognize the merits of private ownership as they navigate turbulent economic landscapes.
The retail sector overall has seen significant disruptions lately; major retailers have needed to adapt or cede market share to rivals who cater to ever-increasing demands for convenience and personalization. The Nordstrom deal is emblematic of this shift, highlighting how brands are willing to explore new pathways for longevity and relevance.
Seeing the acquisition agreement approved unanimously by Nordstrom's board—excluding Erik and Pete Nordstrom, who recused themselves from the vote—indicates broad confidence among stakeholders about the deal's potential benefits. Analysts and investors alike remain observant of how this acquisition will manifest changes within Nordstrom’s operating model and long-term strategy.
Until the deal closes, the company will continue operating and serving its customers from its vast network of physical stores, as well as its established online platforms. By going private, the Nordstrom family aims to realign and invigorate the company’s direction for succeeding generations.
