The iconic retailer Nordstrom (JWN) is transitioning from a publicly traded company back to private ownership in a deal orchestrated by the founding Nordstrom family and retail investor El Puerto de Liverpool. This significant shift, valued at approximately $6.25 billion, marks a pivotal moment in Nordstrom’s 123-year history.
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This transaction involves the acquisition of all outstanding shares in an all-cash arrangement, with each shareholder receiving $24.25 per share. This represents a nearly 36% premium compared to the stock’s opening price of $17.78 at the beginning of the year, yet falls short of Morningstar analyst David Swartz’s valuation of $38.50 per share. He expressed disappointment with the final offer, considering it significantly below his assessment.
A Deep Dive into the Nordstrom Privatization
The Nordstrom family, currently holding a 33% stake, will gain majority ownership following the transaction’s anticipated completion in the first half of 2025. El Puerto de Liverpool, a prominent real estate and department store conglomerate with a current 10% stake in Nordstrom, will be a key partner in this venture. Their portfolio includes well-known brands such as Gap, Banana Republic, and Williams Sonoma, alongside department stores and other retail formats. The deal requires approval from two-thirds of Nordstrom’s shareholders.
This isn’t the first attempt at privatization. In 2018, the Nordstrom family proposed a buyout at around $50 per share, a bid rejected by the company’s board. Since then, Nordstrom’s net earnings have seen a significant decline, dropping 76% between 2018 and 2023.
Despite his reservations about the price, Swartz anticipates the deal will likely proceed due to the unanimous approval from the Nordstrom board, which includes Erik and Pete Nordstrom, and the apparent lack of opposition. He suggests both the Nordstrom family and El Puerto de Liverpool are securing a favorable agreement, capitalizing on the current depressed state of Nordstrom’s results and the generally lower valuations assigned to department store companies by public shareholders.
Recent Performance and Future Outlook
While the acquisition price reflects a discounted valuation, Nordstrom has demonstrated recent positive growth. Third-quarter same-store sales saw a 4% increase for the namesake brand and a 3.9% rise for the off-price Nordstrom Rack division. Analysts project Nordstrom’s full-year fiscal 2024 sales to reach $14.5 billion, a slight increase from the $14.2 billion recorded last year.
This move to privatization raises questions about Nordstrom’s long-term strategy. Freed from the pressures of quarterly earnings and shareholder expectations, the company may have greater flexibility to implement changes and invest in long-term growth initiatives. The partnership with El Puerto de Liverpool could also unlock new opportunities for expansion and innovation.
Conclusion: A New Chapter for Nordstrom
The Nordstrom privatization signifies a significant transition for the company. While the acquisition price might be viewed as a bargain by some, it allows the Nordstrom family to regain control and potentially reshape the company’s future trajectory away from the scrutiny of the public market. The collaboration with El Puerto de Liverpool adds another layer of complexity and potential opportunity to this new chapter in Nordstrom’s history. Only time will tell how this strategic shift will ultimately impact the iconic retailer.
