Macy’s Responds to Activist’s Board Nominees

Updated Feb. 20 at 4:41 p.m. EST

Arkhouse Management is keeping the pressure on Macy’s Inc.

On Tuesday, Macy’s indicated that Arkhouse launched a proxy fight with Macy’s by submitting nine individuals to stand for election to the retailer’s board of directors at the company’s 2024 annual meeting, despite its rejection last month of Arkhouse’s $21 a share takeover proposal made in conjunction with Brigade Capital Management on Dec. 1. At the time the bid was valued at $5.8 billion and widely regarded as too low. Macy’s shares shares closed down just over 1 percent on Tuesday to $19.26.

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In response to the notice on receiving the nominations, Macy’s demonstrated support for its 14-member board, stating: “Macy’s Inc. has a diverse, experienced and engaged board who collectively bring expertise in areas relevant to Macy’s Inc.’s business, strategy and guiding the company in creating shareholder value. Our board of directors and management team are open to value creation opportunities, and we have a proven track record of evaluating a broad range of options with that objective in mind.

“Over the past year as part of our leadership succession plan, our board, together with our management team, has taken a critical look across all aspects of our business to develop a forward-looking strategy that leverages our strengths, heritage, and previous investments with a focus on customer experience across omnichannel nameplates and platforms. We look forward to sharing more on this value-creating strategy as part of our fourth quarter and full year 2023 earnings report.”

Macy’s also indicated that it will report its fourth-quarter and full-year earnings on Feb. 27 but has yet to reveal the date of its annual meeting, which typically has been held in May.

Arkhouse managing partners Gavriel Kahane and Jonathon Blackwell said in a joint statement that since its $21 per share proposal to acquire all the outstanding shares of Macy’s it didn’t already own, Macy’s board has shown “unwillingness to meaningfully engage.…We have persisted in our attempts to resolve any supposed concerns privately with the board since the company’s rejection of our proposal. To that end, we provided the board with additional details regarding our financing, including names of our highly regarded equity partners — which have more than $75 billion in combined assets under management — for the 50 percent equity component of the transaction. We also reminded the board that we remain optimistic that we will be able to increase the proposed purchase price based on customary due diligence, which the company has refused to grant us. Finally, we requested that the board extend the Feb. 19 deadline for director nominations so that we could continue to engage privately, which was also rejected, forcing us to nominate directors.

Arkhouse tapped several high-profile names in retail and real estate circles, including:

Arkhouse is known for investing in real estate and would be interested in Macy’s because of its valuable property holdings, which include its Herald Square flagship and other store properties in Brooklyn and elsewhere, as well as owned distribution centers and land adjacent to Macy’s department stores, such as parking lots. 

Macy’s on Tuesday also reiterated its opposition to the takeover bid by Arkhouse, stating, “As previously announced, upon receipt of the proposal and consistent with its fiduciary duties, the board conducted a careful review of the proposal in consultation with its independent legal, financial and real estate advisers. Given concerns by the board and our advisers about Arkhouse and Brigade’s ability to successfully execute the financing plan included with their proposal, we requested additional information, but such limited additional information provided by Arkhouse, Brigade and their financial adviser failed to address the board’s concerns. Ultimately, the board determined that the proposal was not actionable and lacked compelling value.”

Macy’s indicated that it directed its financial advisers to engage again with Arkhouse and Brigade’s financial adviser for further clarity on the types of additional financing information they could provide to potentially advance discussions with the board. “Rather than make any attempt to provide additional information, Arkhouse instead sent a letter to our board on Sunday, Feb. 11, 2024, requesting we extend our director nomination window by 10 days and claiming inaccurately that they had responded to any outstanding issues,” Macy’s said.

“Arkhouse and Brigade have yet to provide any financing details that would enhance the actionability of their proposal despite multiple opportunities to do so, and instead of attempting a constructive dialogue, Arkhouse has chosen to launch a proxy contest.”

The Macy’s board is evaluating the slate of board nominees proposed by Arkhouse and will present its recommendation with respect to the election of directors in the company’s proxy statement, which will be filed with the Securities and Exchange Commission ahead of the company’s 2024 annual meeting.

For Macy’s, the Bank of America Securities and Wells Fargo are acting as financial advisers and Wachtell, Lipton, Rosen & Katz is acting as legal adviser.