Nordstrom, the iconic department store chain, is taking the monumental step of going private after over five decades of trading on public markets. The company has agreed to be acquired by its founding family and the Mexican retail group El Puerto de Liverpool for $6.25 billion, marking a significant shift as the retailer seeks to navigate growing competition from retail giants such as Amazon and Walmart.
The acquisition, announced on Monday, will see shareholders receiving $24.25 per share, representing a generous 42% premium to Nordstrom's closing stock price from March 18, 2024. This kind of premium is welcomed by investors who have watched the company's stock price struggle amid the fierce competition from discount retailers and shifting consumer preferences.
“Today marks an exciting new chapter for the business,” said CEO Erik Nordstrom, confirming the deal and expressing optimism about the company's future. The Nordstrom family, through this agreement, aims to provide long-term stability, free from the pressures of public market scrutiny. Combined with the backing of El Puerto de Liverpool, which operates numerous department store chains across Mexico, the company aims to blend the families' retail expertise with Liverpool's operational strengths.
The board of directors unanimously approved the buyout, anticipating the deal to close in the first half of 2025, pending regulatory approvals and shareholder agreement. Shareholder sentiment appears largely positive, as this transition will enable the Nordstrom family to focus on long-term planning and investments without quarterly earnings pressures weighing on decision-making.
This isn't Nordstrom's first attempt at privatization. Discussions to take the business private began as early as 2018 but floundered without conclusion. Fast forward to April of this year, when Erik and Pete Nordstrom (the company's CEO and president respectively) initiated talks again, triggering fresh speculation and proposals for going private. While earlier propositions lacked substance, the latest agreement with El Puerto de Liverpool has materialized, signalling decisive action from both sides.
Industry analysts interpret this acquisition as particularly timely, especially since many traditional department stores, including Macy's and Kohl's, face ever-growing challenges to provide substantial returns to shareholders amid fierce competition from e-commerce and discount giants.
“While this change of ownership does not automatically remedy all of the problems with the department store operation, it will allow the family and their backers to take a long-term view of the business,” remarked Neil Saunders, GlobalData’s Retail Managing Director. He highlighted the Nordstrom family’s talent to drive necessary change without the constraints of public market demands.
Importantly, if the deal proceeds as planned, it will lead to Nordstrom ceasing to exist as a publicly traded company. This means shareholders will have to make choices about their investments, whether to accept the exit opportunity now or hold on for the future as Nordstrom repositions itself with new strategies.
Along with the cash buyout, there are also plans for temporary special dividends and the continuation of quarterly dividends until the transaction is finalized. This payout is seen as attractive for shareholders, providing them added value as transition negotiations take place.
Investors have been under significant pressure as Nordstrom navigated declining sales and shifting consumer preferences. Earlier this year, Nordstrom Rack, the company’s discount brand, experienced notable sales growth, illustrating the changing spending habits among consumers seeking value over luxury. Such shifts highlight why private ownership could be advantageous, allowing the company to concentrate on profitable growth strategies.
The partnership with Liverpool also introduces valuable international retail expertise. Liverpool’s experience managing department stores and retailing across Latin American markets positions Nordstrom to leverage new operational tactics aimed at enhancing customer experience and optimizing supply chains.
El Puerto de Liverpool has demonstrated its ability to thrive within the retail sector, operating multiple department store chains including Liverpool and Suburbia, as well as numerous shopping centers. This partnership could enable Nordstrom to innovate and adopt new practices, potentially reinvigorate its brand, and attract customers back to its luxury offerings.
The closing of the acquisition is contingent upon approval from two-thirds of Nordstrom's shareholders, as well as necessary regulatory conditions. Many experts project this will be achievable, reflecting confidence among investors. Should the transaction receive the required approvals, it will fundamentally transform how Nordstrom operates going forward.
Nordstrom's legacy, from its beginnings as a shoe store established in 1901 to its growth as one of the leading department store brands, rests heavily on optimizing how it delivers value to customers. The Nordstrom family now hopes to augment this legacy with their continuous commitment to quality service as they transition to what they hope will be more sustainable operations under private ownership.
Nordstrom stands at the crossroads of tradition and innovation as it gears up for this significant change. The company's forward-looking initiatives and this new chapter promise to shape the future of retail and potentially inspire other storied brands facing similar pressures.
