Nordstrom Family Aims to Reclaim Retail Legacy with $3.8 Billion Privatization Bid

The Nordstrom story began with John W. Nordstrom, a Swedish immigrant who arrived in the United States in the late 19th century. After working in various jobs, including prospecting for gold in Alaska, he used his savings to open a small shoe store in Seattle in 1901, partnering with Carl F. Wallin. This store, originally called Wallin & Nordstrom, was the beginning of what would become Nordstrom, Inc.

The Nordstrom family is making a significant move to take their iconic department store chain private with a $3.8 billion offer. This ambitious plan was revealed by Erik and Peter Nordstrom, the great-grandsons of founder John Nordstrom, who have been contemplating ways to remove the company from the public eye. The brothers have partnered with other family members and El Puerto de Liverpool, a Mexican department store chain that acquired a nearly 10% stake in Nordstrom two years ago, to formulate the buyout proposal.

Nordstrom family makes $3.76B offer to take retailer private https://t.co/jFeIENFFHF

— K. Mantle (@BossMantlemoto) September 4, 2024

The proposed deal values Nordstrom at $23 per share, aiming to restructure the business away from the pressures of public trading and quarterly earnings reports. However, this isn’t the first time the Nordstrom family has attempted such a move. In 2018, they offered to take the company private at $50 per share, but negotiations fell through. The current offer may still face skepticism from shareholders, reflecting the uncertain outlook for traditional department stores in the U.S.

American department stores have struggled in recent years, with many turning to mergers and acquisitions to navigate the changing retail landscape. For instance, Macy’s Inc. recently declined a bid from activist investors seeking to take it private, and the owner of Saks Fifth Avenue successfully acquired Neiman Marcus Group with the assistance of Amazon earlier this year. High inflation and interest rates have also pushed shoppers toward more affordable options, impacting stores like Nordstrom. Despite these challenges, Nordstrom’s Rack discount division has outperformed expectations, offering a glimmer of hope for the chain’s overall financial health.

• Growth and Expansion: The business was successful, and by the 1920s, John Nordstrom bought out Wallin’s share and handed over the business to his sons, Everett, Elmer, and Lloyd Nordstrom. The second generation expanded the company into a regional department store chain specializing in shoes. In the 1960s, the company began diversifying its product lines to include clothing and other accessories, ultimately transforming into a full-line department store.
• Public Offering and Modern Era: In 1971, Nordstrom went public, becoming Nordstrom, Inc. The company continued to grow, with new stores opening across the United States. It became known for its high-quality customer service, wide range of luxury goods, and a liberal return policy.

The financing for the proposed buyout will come from a mix of equity and cash from the Nordstrom family and Liverpool, alongside $250 million in new bank loans. Should the transaction proceed, ownership of Nordstrom would be divided, with the family holding a 50.1% stake and Liverpool controlling 49.9%. Liverpool, a leading department store operator in Mexico with 312 locations, has pledged at least $1.2 billion in new capital, sourced from its own funds and additional financing.

This potential deal could attract other interested parties, particularly given the promising performance of Nordstrom’s Rack stores. Indeed, shares of Nordstrom rose 3.1% to $23.55 in recent trading, surpassing the proposed buyout price and reflecting a 35% premium over the trading price from mid-March, when discussions about the privatization first surfaced.

Nordstrom’s board of directors has acknowledged receipt of the proposal and has formed a special committee of independent directors to thoroughly evaluate the offer. Liverpool, which has a storied history dating back over a century and is run by descendants of its French founding shareholders, views this investment as a strategic expansion beyond its home market. The company has previously explored acquisitions outside of Mexico, including a failed attempt to take over Chile’s Ripley SA in 2015.

Nordstrom family offers to take store private for $3.76B with Mexican retail group https://t.co/AuYmNTLdTn

— Derrick R (@juniorvalero151) September 4, 2024

Liverpool’s involvement adds significant weight to the privatization effort. The company, valued at $8.2 billion, continues to explore growth opportunities outside Mexico, further evidenced by its investment in Nordstrom. Max David Michel, a member of Liverpool’s founding family and one of Mexico’s wealthiest individuals, recently stepped down from his role as chairman, but the Michel family remains influential through their substantial investments in retail and other sectors.

More Information

• John W. Nordstrom (1871–1963): The patriarch of the Nordstrom family, John W. Nordstrom, was the founder who started the shoe store business in Seattle in 1901. He is remembered for his entrepreneurial spirit and business acumen that laid the foundation for the family business.
• Everett Nordstrom (1903–1972), Elmer Nordstrom (1904–1993), and Lloyd Nordstrom (1907–1976): The three sons of John W. Nordstrom who took over the business from their father in the 1920s. They are credited with expanding the company beyond its original shoe store concept to a full-line department store, setting the stage for national expansion.
• Bruce Nordstrom (born 1933): A third-generation family member, Bruce Nordstrom is the son of Everett Nordstrom. He joined the company in 1958 and served as its CEO from 1968 to 1995. Under his leadership, Nordstrom expanded significantly, opening numerous stores across the U.S. He is credited with strengthening the company’s reputation for exceptional customer service.
• Blake Nordstrom (1960–2019), Peter Nordstrom (born 1961), and Erik Nordstrom (born 1963): The sons of Bruce Nordstrom, representing the fourth generation of the family involved in the business. Blake, Peter, and Erik held various leadership roles in the company, with Blake serving as co-president until his untimely death in 2019. Peter and Erik continue to lead the company, with Erik currently serving as the CEO.

Key Points:

• The Nordstrom family plans a $3.8 billion offer to take the company private, teaming up with Mexican retailer Liverpool.
• The bid seeks to restructure Nordstrom outside the scrutiny of public markets and quarterly reports, priced at $23 per share.
• Nordstrom’s previous attempt to go private in 2018 failed, reflecting the challenging environment for U.S. department stores.
• Financing for the deal includes equity from both the Nordstrom family and Liverpool, along with new bank loans.
• Nordstrom’s board will review the proposal while the potential for additional bidders remains open due to Nordstrom Rack’s strong performance.

Fallon Jacobson – Reprinted with permission of Whatfinger News