Nordstrom Family Group Offers $3.8 Billion to Go Privatize

Members of the Nordstrom family, including CEO Erik Nordstrom and his brother Pete, who is the company’s chairman, teamed up with Mexican retailer El Puerto de Liverpool to buy the department store for $23 per share or $3.8 billion in cash.

The transaction will be financed “through a combination of revolving capital and cash commitments from members of the Nordstrom and Liverpool families and $250 million in new bank financing.” Existing debt will remain outstanding, according to a company press release.

A special board committee, formed earlier this year when Nordstrom expressed interest in submitting a potential offer, is reviewing the proposal and has no further comment.

The scope of the offer is somewhat unusual, given that it is in line with Nordstrom’s current share price, which theoretically would not encourage shareholders, but the influence of the Nordstrom family changes that dynamic, according to emailed comments from GlobalData Retail Managing Director Neil Saunders. Furthermore, the involvement of El Puerto de Liverpool could mean that the price eventually increases, he also said.

Nordstrom has struggled in recent years, but both its full line and off-price Rack saw sales rise in Q2. The ongoing volatility could mean this deal is more or less what shareholders might expect.

“The offer comes as Nordstrom is getting back on track after a long period of underperformance,” Saunders said. “However, the business remains one of two halves. The department store division has structural challenges, while the off-price Rack division is starting to deliver some good growth. These mixed prospects will limit how much either side is willing to pay.”