Members of the founding family of Nordstrom Inc. have formed a group to explore a going-private transaction, according to a company statement June 8, which sent the department store's stocks soaring in premarket trading.
The privatization transaction would involve the family group acquiring 100% of Nordstrom's outstanding shares of common stock. The group collectively owns 51,830,957 shares, representing about 31.2% of outstanding shares, according to a June 7 ownership filing submitted to the Securities Exchange Commission.
The group, which includes Chairman Emeritus Bruce Nordstrom; President of Stores James Nordstrom; Anne Gittinger, who owns 9.3% of outstanding shares of Nordstrom common stock; and co-presidents Blake, Peter and Erik Nordstrom, has not made a formal proposal to the company but said in the news release that they are considering the possibility of going private.
"Because of the changing dynamics in the retail environment, the group is evaluating whether the long-term interests of the issuer (Nordstrom) are better served as a privately held company," the group said in the ownership filing.
Shares of the department store rose 15.9% in premarket trading following the announcement, but were down 4.35% from the opening price of $46.94 in midday trading. The news of an exploratory privatization came on the heels of Nordstrom's weak sales and struggling profit results in its fiscal first-quarter earnings release May 11, as demand for apparel moved online.
Analysts at Gordon Haskett Research Advisors wrote in a research note following the announcement that the news puts Nordstrom in play for other suitors, including Hudson's Bay Co. and other retail-focused private equity firms.
"With one of the best brands and models in retail (despite the recent turbulence in comp trends) — we have to think that today's news could attract other potential bidders in the coming weeks," the analysts wrote.
Nordstrom's board formed a special committee of independent directors to act for the company regarding the potential privatization, according to the company statement. This special committee has agreed with the Nordstrom family that the family cannot, without permission from the committee, take certain actions including acquiring any voting securities, offering or proposing to enter into a merger, initiating shareholder proposals, or seeking to influence the election of the board, until Jan. 31, 2019.
The special committee hired Centerview Partners LLC as its financial advisor and Sidley Austin LLP as legal counsel.
Gordon Haskett analysts said in the research note that they don't expect many other department stores to follow Nordstrom's lead, with the possible exception of Dillard's Inc., which has a similarly high degree of family ownership.
"The structural challenges for the traditional department stores are abundantly clear today (i.e. unfavorable demand vs. supply imbalance, over-stored issues, declining customer traffic, etc.) and therefore we don’t foresee anything similar transpiring at Macy's Inc., Kohl's Corp., and/or J. C. Penney Co. Inc., particularly since family ownership is virtually nonexistent," the analysts said in the note.