Merger plan: A Saks Fifth Avenue store in New York City. The company’s move to acquire Neiman Marcus Group will unite America’s two largest high-end department-store chains. — AFP
NEW YORK: The owner of Saks Fifth Avenue is close to acquiring Neiman Marcus Group for US$2.65bil, according to a person familiar with the matter – a deal that would unite America’s two largest high-end department-store chains in a bid to grab a bigger share of a slowing industry.
Amazon.com Inc and Salesforce Inc will help facilitate the deal by Saks owner Hudson’s Bay Co. The tech companies will take minority stakes in a new company, called Saks Global, according to the person.
Hudson’s Bay will also finance the deal with US$2bil raised from investors, the person said.
Representatives for Hudson’s Bay, Salesforce and Amazon declined to comment. A spokeswoman for Neiman Marcus didn’t respond to requests for comment.
The combined operations would include 39 Saks Fifth Avenue stores and 36 locations under the nameplate of its Dallas-based competitor, as well as two Bergdorf Goodman stores in Manhattan.
Both chains also have outlet stores. The goal of the deal is to cut costs and boost profitability by giving the new company bargaining power with vendors and reducing supply-chain and other shared costs.
The deal might be announced soon, according to The Wall Street Journal, which earlier reported the news. Marc Metrick, chief executive officer of Saks Fifth Avenue’s online operations, will run the combined companies, the Journal said.
The deal is the culmination of on-again, off-again talks between the two privately-held competitors during the past decade and a half.
Momentum began to build when Neiman declared bankruptcy in 2020, shedding debt and making it a more attractive target, and accelerated as luxury sales have weakened in the past year or so.
Neiman’s bankruptcy also brought in new owners – Pacific Investment Management Co, Davidson Kempner Capital Management and Sixth Street Partners – that typically seek a relatively quick return on their investments, rather than spend years in the minutiae of a retail turnaround.
The involvement of Amazon “adds a bit of spice to an otherwise predictable deal,” GlobalData analyst Neil Saunders wrote in a research note. Its stake would make sense, he said, “as it has ambitions to play more heavily in the luxury space and this would give it a toehold.”
This would be among Amazon’s first investments in a physical retailer since it bought Whole Foods in 2017 to help the online retailer push into the grocery business.
While Amazon has been dabbling in luxury goods, a better view into the sector could help it test the waters in the industry. The eCommerce giant has done that in other industries, taking stakes in cargo carriers behind its Prime Air delivery business.
Salesforce has touted luxury-brand partners such as Louis Vuitton and McLaren, but doesn’t usually take direct stakes in the companies. Its venture investments page lists dozens of stakes in software startups, not retailers.
Elsewhere in the industry, Nordstrom Inc’s founding family has said it’s considering taking the retailer private.
The new chief executive officer at Macy’s Inc is rolling out his turnaround plan, which includes shutting almost a third of the company’s namesake stores – part of efforts to address demands from activist investors.
A decline in share prices across department stores has been driving the recent uptick in deal activity, Fitch Ratings analyst David Silverman said. — Bloomberg
