Another ‘No’ For Nordstrom Family Trying To Go Private

6. March 2018.








Nordstrom isn’t going private this time. Although the retailer was bullish about striking a go-private deal before this week’s earnings report, it has once again decided to take a pass on the private life, at least until it receives an adequate offer.

According to news from CNBC, the Nordstrom family offered $50 a share to take the retailer private. The special committee advising the board said Monday that it would not be accepting the offer, leading stocks to plunge around 2 percent (to $50.50 per share) in after-hours trading on Monday, March 5.

The special committee was appointed last year by a group of Nordstrom family members, who own 31.2 percent of the company and who have been trying to take the retailer private since 2017. Unless the family can offer substantially more, the special committee said it plans to end discussions.

Monday’s offer was indicative — in other words, it may not have had sufficient financing behind it.

Nordstrom has reportedly been meeting with financing banks to discuss options in recent weeks. The public market remains punishing to retailers and ties their hands, as many hope to make shrewd moves to keep up with and transform the industry around them.

Nordstrom’s “going private” story has been a saga of “will they, won’t they” for the past year, but there are few factors in the company’s favor that were not at play during the fall of 2017.

As market shifts drive competitors to cut costs and close stores, Nordstrom has been investing in revamping its 122 department stores, acquiring eCommerce companies like HauteLook and Trunk Club and even trying to get a foothold in Manhattan to the tune of $500 million, Yahoo! Finance noted.

Nordstrom has not seen profits rise as a result of those efforts and has apparently given up on convincing Wall Street that investing for the long-term is a wise strategy that can generate results for the family-owned company. Instead, the family has been trying to take the company private but has been unable to generate enough financing for a deal estimated at over $10 billion.

However, a few things have changed since the family’s last attempt to take Nordstrom private in the fall of 2017. Back then, lenders were reluctant to support a retail-leveraged buyout thanks to widespread fears about the future of the industry. And can anyone blame them, with Toys R Us and countless others taking on substantial debt as they fought a losing battle against bankruptcy?

Now, Nordstrom has seen comparable sales up 1.2 percent since last year and total sales up 2.5 percent. New stores have been opened. Holiday sales were strong. The company was even able to modestly boost its full-year earnings guidance.

Furthermore, the tax reform bill that went into effect at the turn of the calendar year generated some profit boosts for the business, reducing corporate taxes from 35 percent to 21 percent, which translates to around a 20 percent increase in after-tax income, according to The Motley Fool.

These advantages make Nordstrom a more desirable buy than it would have been in the fall, so why would the company sell itself short? The answer, as indicated by its refusal of the family’s most recent offer, is it wouldn’t.

But it’s a risky time to be piling on debt, so if someone wanted to make Nordstrom a better offer than it got from its own family, it’s probably something the retailer would consider.

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