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Nordstrom Soars as Founding Family Mulls Plan to Go Private

Bloomberg logoBloomberg 6/8/2017 Lindsey Rupp

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(Bloomberg) -- The Nordstrom family is considering taking private its eponymous department store chain as it confronts the deepening troubles in American retailing.

The news, announced early Thursday, sent Nordstrom Inc. stock -- listed in 1978 -- on its biggest rally in more than eight years.

Like many department stores around the world, the 116-year-old Nordstrom has struggled to cope with the decline of shopping malls and the relentless rise of internet retailing. But the chain, America’s largest, is in a far stronger position than most, making a family-lead buyout a viable prospect.

“It completely makes sense if you’re them,” said Tony Scherrer, director of research at Smead Capital Management. The firm has about $2 billion in assets under management, including shares of Nordstrom. “They’re saying, ‘This is a time of retail hell when we’re not being respected in the public marketplace. So why be in the public marketplace?’”

Family members have formed a group to evaluate a possible deal, which would involve acquiring 100 percent of the outstanding shares, Seattle-based Nordstrom said on Thursday. The board also has created a special committee in connection with the idea.

Shopping Is Dropping© Bloomberg Shopping Is Dropping

The move follows disappointing results for Nordstrom, the largest upscale department-store chain in the U.S. It posted first-quarter earnings that missed Wall Street estimates, with comparable-store sales declining 0.8 percent.

But even with sales skidding, Nordstrom’s prestige and relatively lean store count may help get a deal done, said Bloomberg Intelligence analyst Poonam Goyal.

“The company is in a much better place than its rivals and not overstored,” she said.

The prospect of a buyout deal sent the shares up as much as 18 percent to $47.90, the biggest intraday gain since February 2009. Nordstrom’s stock had been down 16 percent this year through Wednesday’s close.

The move jarred credit traders, sending the cost to protect against a Nordstrom default to its highest level in eight years.

Credit-default swaps on the company rose 74 basis points to 253 basis points, according to data provider CMA. That means it would cost $253,000 annually to insure $10 million for five years.

Centerview Advises

Centerview Partners LLC is serving as the board committee’s financial adviser, and Sidley Austin LLP is providing legal counsel.

The family’s group was formed by the company co-presidents, Blake Nordstrom, Peter Nordstrom and Erik Nordstrom, as well as President of Stores James F. Nordstrom, Chairman Emeritus Bruce Nordstrom and Anne Gittinger.

The company said it couldn’t give any details of a possible transaction, and it’s not certain a proposal will be made by the group.

Edward Yruma, an analyst at KeyBanc Capital Markets, estimates that a buyout could occur at $50 to $60 a share.

Nordstrom, which was founded in 1901, operates 354 locations in 40 states. But most of them are Nordstrom Rack outlets, an off-price format that has been more popular with shoppers in recent years. The company has 122 full-line department stores.

Perhaps a move to go private would let Nordstrom re-emerge after the worst of the current retail slump is over, Scherrer said.

“It’s hard to get sentiment much more dour on the retail space as what we have now,” he said. “It’s just a good economic decision.”

--With assistance from Shannon D. Harrington

To contact the reporter on this story: Lindsey Rupp in New York at lrupp2@bloomberg.net.

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net.


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