Macy's to add two Arkhouse nominees to board in deal that will end proxy contest

By Ciara Linnane

Retail chain's board is still reviewing a $6.6 billion bid for the company from Arkhouse and Brigade Capital

Macy's Inc. ended its proxy battle with private-equity firm Arkhouse Management Co. on Wednesday with an agreement to add two of the firm's nominees to the board as independent directors with immediate effect.

The deal comes following talks with Arkhouse, which along with Brigade Capital is seeking to buy the department-store chain for $24 a share, or about $6.6 billion.

Macy's (M) said Richard Clark and Richard L. Markee will join its board, while Tony Spring, Macy's chief executive officer and chair-elect, will assume the role of board chair. Clark previously worked at Brookfield Corp. (CA:BN) before founding real-estate investment company WatermanClark. Markee held various roles at Vitamin Shoppe and has done stints at Toys "R" Us.

"The Macy's, Inc. Board is committed to acting in the best interests of all Macy's, Inc. shareholders, and the composition of our Board is something we take seriously," Paul Varga, the company's lead independent director, said in a statement.

The board is continuing to engage with the two bidders, who launched an initial unsolicited bid valued at $5.8 billion in January. The Macy's board rejected that offer, saying at the time that it lacked "compelling value."

The company has now agreed that Arkhouse will withdraw seven other board nominees and that Clark and Markee will join the board's finance committee, which will evaluate the acquisition proposal.

See also: Macy's bonds rally along with stock after investor group sweetens takeover bid

The board has entered a confidentiality agreement with the bidders and has started to share due-diligence information.

The board "is open-minded about the best path to create shareholder value," the statement said.

The Arkhouse/Brigade bid comes at a time when Macy's is restructuring its business in an effort to boost growth and profitability.

In February, the company announced plans to close 150 stores and book a $1 billion charge. Macy's said the plan also includes monetizing up to $750 million worth of assets.

The goal of the plan is to revitalize its sales assortment, modernize its shopping experience and bolster its position in the luxury market, where the company's Bloomingdale's and Bluemercury stores have been outperformers.

For its fiscal fourth quarter, which ended Feb. 3, Macy's reported a net loss of $71 million, or 26 cents a share, after reporting income of $508 million, or $1.83 a share, in the same period a year ago.

Excluding nonrecurring items - such as the $1 billion charge, of which about $950 million is for store closures over the next three years - adjusted earnings per share came in at $2.45, which was well above the FactSet consensus of $1.98.

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Total revenue fell 2.4% to $8.38 billion, but that was still above the FactSet consensus of $8.09 billion. Same-store sales, or sales at stores open at least a year, fell 5.4%, to miss expectations of a 4.7% decline.

Macy's stock was down 1% in morning trading and has fallen 3% in the year to date, while the S&P 500 has gained 8%.

-Ciara Linnane

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04-10-24 1050ET

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