Nordstrom just announced it looks favorably on a bid from Mexican retailer El Puerto de Liverpool to help take the company private. The merger proposal is now being evaluated by a special committee made up of independent and disinterested partners to determine if it is in the “best interests of Nordstrom and all shareholders.”
The deal, valued at $3.8 billion for a $23 per share price, would be financed by roll over equity and cash commitments by the Nordstrom family and Liverpool, plus an additional $250 million loan to purchase all outstanding shares not currently owned by the Nordstrom family members or Liverpool.
If the merger agreement goes through, it would result in the family group increasing their ownership from about one-third to 50.1% and the remaining shares held by Liverpool.
Liverpool already has a 10% stake in the company that it purchased for around $300 million (5.9 billion pesos) in September 2022. At the time, Liverpool said the investment “presents an attractive opportunity for geographic diversification.”
Nordstrom Wants Freedom From Wall Street
Acceptance of the deal will fulfill the wishes of the Nordstrom family, most especially brothers CEO Erik Nordstrom and president Pete, and free them from the pressures of Wall Street investors to deliver quarter-on-quarter and year-over-year growth.
That is increasingly difficult in today’s rapidly shifting retail market, most especially traditional department stores where revenues dropped a precipitous 24% from 2019 to 2023, according to the U.S. Retail Census.
Nordstrom did better than that, but revenues still declined 6% from $15.1 billion in 2019 to $14.2 billion in 2023. It got a reprieve during the first half of 2024 with revenues up 4.2% to $7 billion, but virtually all was credited to an 11% gain in its off-price Nordstrom Rack division, while the full-price Nordstrom flagship was basically flat at $4.6 billion.
GlobalData’s Neil Saunders called out the split personality of the Nordstrom business with one side focused on legacy luxury retail and the other discounted fashion, two distinct businesses that don’t necessarily fit well together.
“The offer comes at a time when Nordstrom is getting back on track after a long period of poor performance,” he shared with Retail Dive “However, the business remains one of two halves.”
Nordstrom currently operates 93 Nordstrom flagship stores and 269 smaller Nordstrom Rack locations with another 12 slated to open through the end of the year.
Liverpool Wants To Cross The Border
If Nordstrom accepts the merger proposal, it will be quite a catch for the nearly 200-year-old diversified Liverpool company that is rated as the fifth largest Mexican retailer after Walmart, Oxxo, Sorianna and Coppel.
The company currently operates some 300 stores in Mexico plus a thriving e-commerce marketplace and financial services business with 7.2 million store credit card holders. Its banners include 124 Liverpool department stores, 186 Suburbia specialty fashion boutiques and 28 Galerias shopping centers.
Plus Liverpool manages the Mexican operations of nearly 120 boutiques with U.S. partners, among them Gap, Banana Republic, Williams Sonoma, Pottery Barn, West Elm, MAC and Kiehl’s.
It is also the Mexican partner for El Corte Inglés-owned Sfera fashion brand operating over 50 boutiques and has a 50% stake in Unicomer, which sells furniture and other home items, electronics, motorcycles, optical goods and consumer credit in Latin America and the Caribbean.
Liverpool has the financial heft to pull this off. It generated some $9.8 billion (195.9 billion pesos) in 2023 with revenues up 11% and an EBITDA margin of 18% that’s risen over the last three years.
Roughly 90% of revenues come from retail operations, the rest from credit cards and real-estate, both of which grew over 20% year-over-year with retail advancing 10%. The company employs 80,000 people and has training and educational programs to develop in-house talent.
And Liverpool is garnering recognition for outstanding business practices. In 2023, it was named the best company in the Supermarkets and Department Store category for attracting and retaining talent in Mexico by Merco Talent ranking.
Liverpool was also awarded second place by the Intercontinental Group of Department stores for innovation and recognized by Time Magazine as one of the World’s Best Companies and ranked 4th among the 11 Mexican companies listed.
As potential merger partners go, Liverpool may not understand the U.S. retail market, particular the upscale Nordstrom flagship customer, but it has a firm fix on the needs of the growing Hispanic and Mexican-American consumer market.
Liverpool also has a track record of working with other U.S retailers and understands how to play well with partners to navigate their sometimes conflicting demands.
Second Times The Charm?
Nordstrom tried unsuccessfully to go private in 2018. After the merger news, Nordstrom shares closed just under $23, way down from around $50 at the start of 2019. And that was the price offered per share in the last failed private bid.
“If Nordstrom goes private, the retailer will face less pressure to deliver quick results to please public company investors,” corporate lawyer specializing in mergers and acquisitions Jonathan Lazarow shared with Glossy.
“As a public company, Nordstrom is incentivized to deliver quarterly returns that demonstrate growth and increased profitability. In today’s retail market, this is increasingly difficult to do as traditional retailers are attempting to manage the changing shopping habits.”
He added that by being freed from the demands of Wall Street, Nordstrom will be able to make “sweeping changes to the company’s strategy much more quickly.”
By having an established retailer like Liverpool in its camp, even if it is just learning about the U.S. retail consumer market, it will have a partner that understands the ups-and-downs of retail and knows how to operate a successful retail business.
Note: Nordstrom is not delivering any further statement on the proposal and Liverpool did not reply to a request for comment before posting.
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