Macy’s shares surged Friday as takeover rumors continued to swirl around the company, but at least one purposed combination would be tough to pull off, sources say.
Earlier, shares of the largest U.S. department store chain jumped more than 10 percent, after The Wall Street Journal reported Macy’s had been approached by Canada’s Hudson’s Bay, the owner of Saks and Lord & Taylor.
People familiar with the matter told CNBC that those discussions did take place but the talks are at an early stage, and may not lead to a deal.
Those people said Macy’s management took a meeting with Hudson Bay, but has not engaged with talks on a deal.
Hudson’s Bay has been eager to expand its footprint in the U.S., Macy’s would be a challenge for Hudson’s Bay to absorb. Ahead of this latest rumor, Macy’s market capitalization was nearly $10 billion, while Hudson’s Bay was about $1.7 billion. Macy’s also has a lot of debt — about $7.5 billion, according to the Journal report.
People familiar with the talks said Hudson’s Bay might need to bring in a partner to provide equity, but would still need to lever the combined company a great deal to make it happen. One potential scenario could involve Hudson’s Bay making the purchase and then splitting into an operating company and a property company with the property company taking on most of the debt.
This complicated structure could make a deal very unlikely, sources told CNBC.
Takeover rumors were sparked Thursday by a report in the New York Post, which said Macy’s was seeking a buyer.
That report, which also cited unnamed sources, said activist investor Jeffrey Smith, of Starboard Value, was putting pressure on the company in the wake of its poor performance. Smith became an investor in July 2015, and Macy’s stock has shed nearly 60 percent since that time, the report said.
Buoyed by the rumors, Macy’s shares jumped as high $34.37 Friday, but had since given back some of those gains. The stock recently changed hands at $32.30, up 5.2 percent.
Hudson’s Bay told CNBC it does not comment on rumors or speculation. Macy’s also declined to comment.
Macy’s has been dogged by disappointing sales in recent quarters andin January it announced 68 of the 100 locations it plans to close as it looks to turn around its performance.
source”cnbc”
