A special committee of Nordstrom's board of directors said on Monday, in consultation with its financial advisor and legal counsel, that it rejected an acquisition proposal from a group of Nordstrom family members (Co-Presidents Blake Nordstrom, Peter Nordstrom, and Erik Nordstrom, President of Stores James Nordstrom, Chairman Emeritus Bruce Nordstrom, and Anne Gittinger), saying their offer of $50 per share in cash is "inadequate."
Also on Monday, the family group had filed a 13D letter containing its proposal to the Securities and Exchange Commission, emailed to Retail Dive by a family group spokesperson.
The special committee also said that it has directed its advisors and management not to provide further due diligence information to the Group. Furthermore, unless the group can promptly and substantially improve the price, the special committee intends to terminate discussions, according to a company press release. The family spokesperson declined to furnish any plans beyond the SEC filing.
The Nordstrom family group's offer comes just days after the department store reported its Q4 results, which included a net sales rise of 8.4% to $4.6 billion and a same-store sales rise of 2.6%, that both handily beat analysts' estimates. At that time, Nordstrom executives opened their conference call with analysts saying there would be no discussion of the "exploration by the Nordstrom family of the possibility of a going-private transaction, or the process," according to a transcript from Seeking Alpha.
In a letter with its SEC filing Monday, the family group indicated that it could have used more time, but understood the company's request for an indication of what any proposal might be.
"We firmly believe that such a proposal involving a continued controlling interest held by the Family would represent an attractive outcome for Nordstrom, its shareholders, employees, customers, vendors and the communities in which Nordstrom operates," the letter also reads. "A transaction would ensure that the Company has the flexibility to successfully navigate a challenging retail landscape at a critical time when the public market for retail stocks is highly volatile and increasingly focused on short-term results and risks."
The family group also argued that its proposal "would provide shareholders the opportunity to realize a purchase price at a significant premium to what we believe would be the Company's 'unaffected' stock price (in light of the $40.48 price per share immediately prior to our public announcement of the formation of a group to consider a going private transaction), allowing shareholders to avoid these risks inherent in the current changing retail environment."
A go-private deal could give Nordstrom a longer timeline to reinvent its business for the modern retail climate. It could also preempt an activist rebellion, such as those some fellow department store chains — including Hudson's Bay Company, Macy's and Dillard's, among others — have been fending off.
"[Wall] Street expects positive results quarter by quarter, which even in the best of times is often unrealistic," Mark Cohen, director of retail studies at Columbia University's Graduate School of Business, said at the time of the announcement. "Going private, assuming it did not entail taking on a crushing level of debt, may very well be the best thing that could happen to Nordstrom."
But the board's special committee apparently doesn't see it that way, saying Monday that it is "committed to protecting the interests of the Company and all of its shareholders."
The family was reportedly near to a take-private deal last fall, but the effort was derailed when the group could not obtain financing. The Nordstrom family group resumed talks this year. A possible deal to take Nordstrom private could shelter the company from Wall Street's bearish outlook on retail, which was actually the thing that killed the deal last year, as financiers became wary of retail deals following the unexpected bankruptcy of Toys R Us.