Is Macy's Over?

$Macy's (M)$ announced on Monday that it had terminated talks with Arkhouse and Brigade Capital Management, rejecting a $6.9 billion valuation for privatization, and the stock erased the gains it had made since the news broke seven months ago.

For its part, the privatization buyer group

1. Already holds over 5% of the shares and threatened a proxy fight with the company to gain 2 board seats, and the company side is quite cooperative, sharing very much detailed data, such as store profit and loss.

2. The two price increases show that they still want to facilitate the acquisition.The first time from 21-24, the second a bit muddled, 24-24.9, basically did not move, the implication is that the consortium still want to buy, but do not want to give too much money.Whether there are difficulties in financing is not easy to say now, but this price is certainly not satisfied with Macy.

3. The buyer's group of Arkhouse, a well-known real estate investment firm, and Brigade Capital Management, a retail-focused venture capitalist, are not quite the same in nature and may have a conflict of interest.With inflation now coming down and consumer confidence starting to fall, Brigade Capital is more likely to be the one to exit.

4. As a result more consideration may have been given to the property part of the valuation in terms of quotes, ignoring retail.

For the company

1. also want to facilitate the transaction, that is, to give the board seat and privacy data, but the offer is really lower than expected, the management's rhetoric also said that the talks are not happy.

2. The company is indeed a sunset industry, the most valuable assets, but the company also has efforts to want to transform, the resources to the lucrative business to rely on, unprofitable the closure of the store will be closed.The next can not prove a U-turn, but the management to prove that the company's valuation is higher than the offer, or to show sincerity.

Market feedback

1. Arbitrage funds can't wait for this wave of cash, surely want to go as soon as possible, hence the big drop on the 15th;

2. Did not fall through, indicating that there are other funds are willing to bottom in, wait and see what happens maybe there is other news;

3. The buyer's group has not yet taken a position, but if it really opens Activist's Buyout, the two sides are going to engage in a proxy fight, and may collect chips in the secondary market, which may instead cause a huge change in the stock price.