Sycamore Stated to Be Eyeing Potential Macy’s Bid – WWD

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There’s unlikely to be many retailers or funds fascinated with bidding for Macy’s Inc., however one potential bidder might be Sycamore Companions.

Two sources instructed WWD that Sycamore, a New York-based non-public fairness fund specializing in shopper, distribution and retail-related investments with about $10 billion in combination dedicated capital, is eyeing Macy’s for a potential bid. The sources imagine Sycamore has the wherewithal and has raised debt, regardless of the powerful borrowing local weather, in preparation for what might be an all-cash provide to purchase the retailer. Subsequent yr, rates of interest are more likely to be extra favorable to M&A exercise.

“He’s essentially the most succesful to drag off that deal,” stated one supply, referring to Stefan Kaluzny, managing director of Sycamore Companions.

Spokesmen for Macy’s and Sycamore each declined remark Friday on the hypothesis.

If Macy’s Inc. turned a personal firm as a part of the Sycamore portfolio, the non-public fairness agency might save tens of millions of {dollars} by eliminating the Macy’s board and the dividends. There might be additional financial savings via consolidations and synergies with different retailers inside Sycamore’s portfolio, together with Belk, the Charlotte, N.C.-based division retailer chain all through the South.

Of higher attraction is Macy’s intensive actual property holdings. Sources indicated to WWD that executives at Sycamore have turn into extra attuned to the worth behind retail actual property. Nevertheless, in contrast to different non-public fairness corporations, Sycamore will get concerned in working retailers and has a observe report of holding onto retail manufacturers for a number of years, fairly than adhering to a brief timetable for getting and promoting.

Hypothesis round a Sycamore-Macy’s tie-up comes within the wake of the $21-a-share bid for Macy’s by Arkhouse and Brigade Capital Administration. That bid, valued at $5.8 billion, is low, providing a small premium, significantly with the inventory spiking after information of the bid emerged. Macy’s inventory closed Friday at $19.71, up 9 cents, or 0.46 p.c. Macy’s generated about $24 billion in gross sales final yr.

Different corporations with observe information for investing in retail are Leonard Inexperienced & Associates, Bain Capital and Texas Pacific Group.

A brand new Macy’s Inc. proprietor might determine to dump items of the enterprise, resembling Bloomingdale’s or Bluemercury, in addition to retail containers, parking areas and warehouses owned by Macy’s to greater than recoup what could be paid for the entire firm.  In a five-year interval, Macy’s raised $2 billion via actual property sell-offs, together with shedding a number of prime downtown properties. Analysis corporations have positioned Macy’s actual property worth from roughly $6 billion to $11 billion.

Sycamore has been build up its retail portfolio and has been extra aggressive this yr. In September, Sycamore struck a deal to purchase Chico’s FAS Inc. for $1 billion. Final August, the agency shaped a brand new holding firm known as the KnitWell Group, comprising its Ann Taylor, Loft and Talbots retail manufacturers, which mixed generate greater than $3 billion in annual gross sales. And in February, Sycamore accomplished its acquisition of Lowe’s Canadian retail enterprise, which modified its identify to Rona Inc. It operates or providers about 450 company and unbiased affiliate vendor shops beneath a number of banners, together with Rona, Lowe’s, Réno-Dépôt and Dick’s Lumber. Sycamore has investments in different retailers together with Staples, Torrid and Sizzling Subject.

Many Belk shops are in secondary markets the place Macy’s doesn’t have a location, and a few might be transformed to Macy’s new specialty format, which was initially known as Market by Macy’s however is altering its identify to only Macy’s. There are 12 small-format Macy’s working and one other 30 are anticipated to open within the subsequent two years. Belk shops are of various sizes, a few of which might match into the small-scale Macy’s idea.

Nevertheless, retail sources believed that Belk wouldn’t be an enormous think about Sycamore’s consideration of a possible bid for Macy’s.

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