Macy’s: Rejection of Takeover Offer May Have Been Prudent, but It Adds Uncertainty; Shares Attractive

Macy's announced that it has terminated discussions with Arkhouse Management and Brigade Capital Management regarding their proposed acquisition of the company. In its statement, Macy's cited significant uncertainty as to whether financing could be arranged, the complexity of the proposed financing arrangements, the distraction to management from the process, and the unappealing offer price. Arkhouse and Brigade recently raised their offer to $24.80 per share after due diligence, but this was an increase of just 3.3% from their prior $24 offer. We do not believe that Macy's board and management was ever eager to sell the company to a group that was likely more interested in monetizing its real estate rather than in improving its retail operations, but Macy's rejection of the offer was probably fair to investors if the financing was unconfirmed.