Nordstrom to Go Private After $6.25 Billion Buyout by Founders and Mexican Retailer
The Nordstrom family, along with Mexican department store chain El Puerto de Liverpool, has agreed on a $6.25 billion deal to take the Seattle-based luxury retailer private, marking a significant shift for the company after years of declining performances and investor disengagement.
Founded over 100 years ago, Nordstrom has become well known for its customer service and high-quality products, operating more than 380 locations across the U.S. Despite its storied history, the retailer has faced challenges recently, including a dramatic 76% drop in net earnings from 2018 to 2023. The deal, expected to close in the first half of 2025, will provide shareholders $24.25 for each share, representing nearly a 36% premium compared to where shares started the year.
Under the terms of the agreement, the Nordstrom family will retain a majority stake, making their ownership 50.1%. This transition back to private ownership is seen as necessary for revitalizing the business, according to Erik Nordstrom, who serves as the company’s CEO. "For over a century, Nordstrom has operated with the foundational principle of helping customers feel good and look their best," said Nordstrom. "Today marks an exciting new chapter for the business. On behalf of my family, we look forward to working with our teams to continue ensuring Nordstrom thrives long term."
Analysts expressed mixed feelings about the buyout, with David Swartz from Morningstar indicating disappointment over the offer price being lower than his valuation of $38.50 per share. Yet, he acknowledged the lack of opposition to the deal, noting it reflects the current market's undervaluation of department store companies.
El Puerto de Liverpool operates various brands and department stores, including Liverpool and Suburbia, alongside known boutiques like Gap and Banana Republic. They initially acquired their stake in Nordstrom last year for about $300 million and have extended their interest to influence the company's direction.
Nordstrom’s recent performance showed some promise—its third-quarter same-store sales rose by 4%, with its off-price segment, Nordstrom Rack, seeing growth of 3.9%. The upcoming holiday shopping season, though uncertain, presents potential as analysts expect full-year fiscal 2024 sales to reach about $14.5 billion.
The decision to take the company private isn’t entirely fresh. Seven years ago, the Nordstrom family attempted to execute similar plans, but financing fell through. This time, following careful evaluations earlier this year, they formed a special committee to assess the feasibility, which resulted in the current agreement.
While some industry insiders believe operations won’t change drastically for consumers, they anticipate possible enhancements to Nordstrom's digital platforms and customer centrism, potentially allowing the company to adapt more seamlessly to market changes as it operates outside the pressures of public trading.
Though historical resistance from investors emerged when the Nordstrom family offered to buy the company at nearly $50 per share back in 2018, the current buyout seems to represent the best pathway forward for all parties involved. Besides CEO Erik Nordstrom, family members Pete and Jamie Nordstrom along with other relatives participated closely in decision-making, presenting united support for the acquisition.
With the stock market closing at $24.17 on the day of the announcement, the company is gearing up for this new chapter under El Puerto de Liverpool's guidance and the Nordstrom family’s majority stake.
For more than 120 years, Nordstrom has emphasized the value of customer service and quality, principles they hope to continue championing as they navigate this transition. This partnership signals their belief in Nordstrom’s potential to thrive, mitigating the challenges they have faced as public company.
