Nordstrom: Value of Possible Acquisition by Insiders Depends on Price Offered; Shares Undervalued

Confirming a recent media report, no-moat Nordstrom’s board has formed a special committee to evaluate a possible offer by Erik and Pete Nordstrom to take the company private. According to a related 13D filing, Erik (CEO) and Pete (president) are acting as trustees for their elderly father and largest shareholder, Bruce Nordstrom. As a group, members of the family own about 30% of the company. Thus far, no offer price has been reported, and funding has not been arranged. The latter could be a roadblock given the current higher interest rates. More importantly, as Nordstrom’s shares trade at about half our per-share $38.50 fair value estimate, we are concerned that an offer price may not provide full value to shareholders. About six years ago, the Nordstrom family proposed taking the company private at a much-higher price of $50 per share, but the offer was rejected by the board due to funding uncertainty and concern that the offer was too low.