Neiman Marcus has reportedly rejected the latest takeover offer from Hudson Bay Company (HBC), owner of luxury department store Saks Fifth Avenue. Discussions are continuing, however, and could lead to a merger in 2024.
Neiman Marcus has rejected the latest offer from Canadian group Hudson Bay Company (HBC), owner of Saks Fifth Avenue, valuing the Dallas-based company at $3 billion, according to a Wall Street Journal article published last Friday.
This is the third time in ten years that the HBC group has proposed a deal to its rival Neiman Marcus, after numerous attempts.
The two distributors were already in discussions in 2005, when Neiman Marcus asked for $5.1 billion, a price HBC considered too high. Negotiations resumed in 2017. However, Neiman Marcus’ $5 billion debt, following two successive takeovers, had made such a rapprochement impossible at the time.
New negotiations to overcome the crisis
Symptomatic of the crisis that has affected most American department stores and other retailers since the mid-2010s, both groups are suffering.
Their latest financial years bear witness to this situation, which has been exacerbated by the slowdown in the US economy.
For example, Neiman Marcus saw its sales fall by 8% to $948 million in the quarter ended October 28. For its part, Saks Fifth Avenue saw its sales volume fall by 11% in both its e-commerce and physical distribution activities over the last three months to July 30.
Under the combined effect of confinements that drastically reduced in-store traffic and debt incurred by two successive purchasers – Ares Management and Canada Pension Plan Investment – Neiman Marcus declared bankruptcy in 2020.
However, the group is now on a firmer footing. Neiman Marcus managed to emerge from Chapter 11 bankruptcy in September 2020, eliminating $4 billion in debt and $200 million in annual interest charges.
For its part, Saks Fifth Avenue has delayed payment of certain suppliers in order to secure its cash position. Its parent company, HBC, which also owns the Hudson Bay department store chain, recently raised $340 million by selling real estate assets in order to consolidate its outlets.
What’s more, Saks Fifth Avenue has opted for exclusivity. Last April, the luxury department store decided to extend its Saks Limitless program to the entire Saks ecosystem.
Better bargaining power
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Featured Photo: © Neiman Marcus – Saks Fifth Avenue