Nordstrom (NYSE: JWN), the century-old US retail giant, is set to go private in a deal that values the company at an enterprise value of $6.25 billion. The Nordstrom family and El Puerto de Liverpool (“Liverpool”) (BMV: LIVEPOL C.1), a Mexican retail giant, have agreed to buy the company for $24.25 per share in cash, about 9.5 times Nordstrom’s 2024 EBITDA.
Shareholders will receive a 42% premium based on the stock price on March 18, 2024, the last trading day before media reports about a potential transaction caused the stock to rise. The deal is anticipated to close in the first half of 2025.
Nordstrom will continue to pay quarterly dividends and plans to issue a special dividend of up to $0.25 per share when the deal is closed.
Why Go Private?
Department stores have been facing difficulties for years, with many shutting down locations or filing for bankruptcy. Stores are struggling with changes in shopping habits and online competition.
While Nordstrom has managed to perform better than some of its competitors, it still encounters its own set of challenges. This recent deal aligns with a growing trend of retailers opting to go private. Going private could help the company be more flexible and adapt without the pressure of quarterly earnings reports.
The Nordstrom family tried to take the company private before. A 2018 attempt fell through due to disagreements over price. The Nordstrom family will roll over their existing equity and Liverpool will provide cash and expertise. Liverpool sees this as a chance to expand into the U.S. market. They’re already a major player in Mexico’s retail scene.
What It Means for Nordstrom
Nordstrom will keep its name and headquarters in Seattle. The existing management team will likely remain intact. The firm hopes to draw on the knowledge of Liverpool in areas like e-commerce and logistics. This could help Nordstrom compete better in the digital age.
The deal needs approval from regulators and shareholders. Two-thirds of all shareholders must approve, as well as a majority of non-Nordstrom family shareholders. If approved, Nordstrom will delist from the New York Stock Exchange. It will become a private company for the first time since 1971.
Retail remains a tough business. Nordstrom will continue to encounter competition from online retailers and shifting consumer behaviors. Additionally, the company carries approximately $2.9 billion in debt. Balancing this debt while also investing in the business may prove to be challenging.
Market Reaction
Nordstrom’s stock jumped on news of the deal but some analysts question that the price is too low, given the premium paid in other retail buyouts.
If the deal closes, Nordstrom will have more freedom to make long-term decisions. This could include closing underperforming stores or investing more in e-commerce. The partnership with Liverpool could open up new opportunities. Nordstrom might expand into Mexico, or adopt some of Liverpool’s successful strategies.
For comparison, other recent retail deals:
- Kohl’s (NYSE: KSS) rejected a $64 per share offer in 2022, which valued the company at approximately $9 billion, around 10x EBITDA. Kohl’s board adopted a shareholder rights plan (often referred to as a “poison pill”) to fend off the takeover, believing the offer undervalued the company.
- Macy’s (NYSE: M) received a $21 per share offer in 2023, valuing the company at $5.8 billion, about 4 times EBITDA. Macy’s ultimately rejected the offer and the company decided to continue with its turnaround strategy.
Final Thoughts
Nordstrom’s go-private move marks a major turning point for the retailer. Backed by the founding family and an international partner, this move is designed to help the company better navigate the ever-changing retail landscape.
However, it’s not a done deal yet, as it still needs the green light from shareholders and regulators. If it all goes through, this transition could reshape Nordstrom’s future and have a ripple effect across the entire retail industry.
FIGURE 1: Retail Comp Table (click to view larger image)
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