Nordstrom, the storied Seattle-based department store chain, is set to undergo significant transformation as it agrees to be acquired by El Puerto de Liverpool, a major retail player from Mexico, for $6.25 billion. This deal marks the Nordstrom family's strategy to take the company private and aims to provide long-term stability amid mounting financial pressures.
Approved by the retailer's board of directors, the acquisition signifies the Nordstrom family, including Erik, Pete, and Jamie Nordstrom, gaining majority control of the business, owning 50.1% of the shares post-acquisition, with Liverpool holding 49.9%. Common shareholders will stand to receive $24.25 per share, which reflects approximately 42% premium to Nordstrom's last trading price prior to the announcement on March 18.
With plans to finalize the transaction during the first half of 2025, the merger will allow the Nordstrom family to steer the business away from the relentless scrutiny of Wall Street, focusing instead on long-term growth strategies. "Today marks an exciting new chapter for the business," commented Erik Nordstrom, the CEO. "On behalf of my family, we look forward to working with our teams to assure Nordstrom thrives long intothe future."
According to Pete Nordstrom, the company is grateful for all the stakeholders who contributed to its legacy, expressing optimism about building on the century-long commitment to outstanding customer service. “We’re grateful to the employees, customers and shareholders who have shaped Nordstrom... Since our founding in 1901, we have been committed to providing our customers with the best possible service,” he stated.
This strategic move follows Nordstrom's historical attempts to go private, having previously courted private equity firms back in 2017 and turning down a hefty $8.4 billion offer just a year later. Retail analysts explain this privatization could provide the flexibility needed for much-needed investments and improvements without the immediate pressure from quarterly earnings reports.
Eric Sprunk, chairman of the special committee overseeing the acquisition, stated, "Following a rigorous... evaluation, the special committee concluded... this transaction offers greater value for all public shareholders at a significant premium to the unaffected share price." This sentiment is echoed by various retail experts, who believe eliminating public market pressures can facilitate necessary operational and merchandising upgrades.
Nordstrom aims to refocus on operational improvements, digital growth, and maximizing the profitability of its off-price Rack division. The deal is structured with financing coming from various channels: rollover equity by the Nordstrom family and Liverpool, substantial cash commitments from Liverpool, and borrowing under a new $1.2 billion asset-backed loan. Despite the $2.7 billion debt hanging over the company, its leaders are confident about managing the financial transition.
El Puerto de Liverpool, which operates two departmental chains and numerous shopping centers throughout Mexico, looks to bring its expertise and investment strength to Nordstrom. Graciano F. Guichard, Liverpool's executive chairman, remarked on the acquisition, "Nordstrom is one of the worldwide leaders... we’re thrilled to be investing in a company... 125 years."
Nordstrom, which started as a humble shoe retailer back in 1901, has navigated the tumultuous waters of retailing, especially against major players like Amazon and Walmart. The company currently boasts of 350 locations, including Nordstrom Rack and Nordstrom Local stores.
Industry experts believe this partnership could also help both retailers explore brand introductions and collaborations. Despite potential future risks, including added debt, going private could allow Nordstrom the breathing room necessary to reinvest and innovate without immediate scrutiny from public markets. Hence, experts speculate this new chapter under the Nordstrom family's leadership may shine new light on Nordstrom’s merchandising strategies as they seek to reclaim their standing as leaders within the competitive retail space.
With the anticipated changes, it's uncertain whether Nordstrom will eventually return to being publicly traded after this phase of private investment, but history shows us it is not uncommon for companies to circle back. The impending transition aims to put Nordstrom back on the track to rediscover its former luster.
