Nordstrom goes private in $6.25 billion deal. Is it a good move?

On By Littum

Nordstrom ( JWN ) is returning to its private roots after years of earnings struggles and investor indifference.

The founding Nordstrom family, which held a roughly 33% stake, teamed up with retail investor El Puerto de Liverpool, owner of a 10% stake, to take the company private. El Puerto is a real estate and department store conglomerate that has stores with well-known names such as Gap, Banana Republic and Williams Sonoma, in addition to department stores and other format retailers.

Both will acquire all outstanding shares in an all-cash deal valued at about $6.25 billion.

The 123-year-old retailer, based in Seattle, Washington, has 381 locations, including 93 Nordstrom and 280 Rack locations, a growing business for the brand.

Upon completion of the transaction, which is expected in the first half of 2025, the Nordstrom family will have a majority ownership stake. Two thirds of the company’s shareholders must approve the transaction.

Each shareholder will receive $24.25 in cash for each share held. The offering price, a hair above the current share price of $24.19, is a nearly 36% premium to where shares started the year at $17.78.

Morningstar analyst David Swartz was “disappointed with the final offer as it is well below” his valuation of $38.50 a share. stock.

In 2018, the company’s board rejected the Nordstrom family’s offer to take it private at around $50 per share. Its net earnings have fallen 76% from 2018 to 2023.

But Swartz expects the deal to go through “at the proposed price,” as Nordstrom’s board of directors, including Erik and Pete Nordstrom, unanimously approved the deal and there has been “a lack of any (apparent) opposition.”

Swartz believes both the Nordstrom family and El Puerto de Liverpool are getting a “good deal,” despite his misgivings about the price.

“While we do not expect resistance, we are disappointed that shareholders will not receive a price closer to our previous valuation and believe that Nordstrom’s and El Puerto de Liverpool are buying Nordstrom at a time when their results are under pressure,” it added he.

Still, he believes that “public shareholders have been reluctant to provide strong valuations to department store companies.”

The company has seen positive growth recently.

Nordstrom’s same-store sales in the third quarter grew 4% for the namesake brand. Sales at its off-price business, Nordstrom Rack, grew 3.9%.

Analysts estimate Nordstrom’s fiscal 2024 full-year revenue at $14.5 billion, up slightly from $14.2 billion last year.