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Macy's (M +12%) rings up meaningful gains today after Arkhouse Management and Brigade Capital Management upped their bid to take the department store chain private. The WSJ reported on July 3, well after the closing bell, that the investor group increased their offer to $24.80 per share from $24.00 per share, a roughly $300 mln increase. The offer values Macy's at just under $7.0 bln, a nearly 40% premium to its previous closing price.

• With the stock still trading significantly below Arkhouse and Brigade's updated purchase price, investors remain skeptical about Macy's accepting the deal. This doubt is not without good reason. In March, the same investor group increased their offer from $21.00/share to no avail. Macy's chose to execute its restructuring plan instead, looking to monetize up to $750 mln of assets through 2026 with annual run-rate savings hitting $235 mln.
• CEO Tony Spring stepped in this past February to steer Macy's through a tumultuous period as discretionary spending wanes in light of sticky inflation while e-commerce competitors remain a considerable threat. Under relatively new leadership, Macy's may choose the turnaround route, especially given Mr. Spring's past as head of Bloomingdale's while overseeing Bluemercury, Macy's luxury banners. Both brands consistently outperformed over the past several quarters, possibly providing Mr. Spring the confidence to bring similar success to Macy's.
• However, one of Macy's peers is looking to fortify its competitive position today. The parent company of Saks Fifth Avenue agreed to acquire Neiman Marcus Group for $2.65 bln to establish a more fortified luxury retail banner. Meanwhile, takeover offers have been extended to another Macy's competitor, as Nordstrom (JWN) has seen several offers to go private. These developments may spur Macy's to act now, especially following an increase in a previous takeover offer.
• Furthermore, competitive and economic pressures generate plenty of headwinds for Macy's. The low end of the company's FY25 comp guidance of negative 1.0% to positive 1.5% assumes no improvement in end demand and constant competitive challenges. In contrast, the high-end anticipates internal improvements to drive increased store traffic. The outlook was not exactly confidence-inspiring; another weak quarter could be all that is needed for enough shareholder pressure to nudge Macy's toward a deal to go private.

The market remains skeptical over Macy's accepting a takeover deal even as Arkhouse and Brigade hike their offer to represent a sizeable premium over Macy's current stock price. If Macy's continues to reject the takeover deal, opting to bet on its turnaround plan, investors could grow impatient if no signs the plan will work unfold over the next quarter or two. By then, the prices offered by any takeover group could drop.