Coverage: Nordstrom board rejects family’s deal to go private

Nordstrom Inc. said it had rejected an indicative take-private offer from its founding family group worth about $8.4 billion, a 2.2 percent discount to the U.S. department store operator’s market value as of the end of trading on Monday.

Harry Brumpton of Reuters had the news:

Nordstrom has formed a special committee of independent directors to review the bid given the family’s 31 percent stake in the company, and it is not unusual for initial offers in such situations to come in low, as both sides seek to demonstrate to shareholders that tough negotiations are under way.

Nevertheless, the fact that the family group’s cash offer of $50 per share was lower than the $51.90 closing price on Monday illustrates the challenges of orchestrating a bid that will appeal to shareholders as well as the investment banks financing the bid and the family’s equity partner, buyout firm Leonard Green & Partners LP.

“The special committee has reviewed the group’s indicative acquisition proposal, in consultation with its financial advisor and legal counsel, and has determined that the price proposed is inadequate,” Nordstrom said in a statement.

The company added that the special committee planned to terminate discussions unless the price offered was “substantially” improved.

Lauren Hirsch of CNBC.com reported that the board rejection is not unusual:

It is not uncommon for boards evaluating management buyouts to reject the first bid tabled, in order to demonstrate impartiality.

CNBC earlier reported the retailer had hoped to have an offer on the table by Nordstrom’s earnings last Thursday, cautioning it did not yet have full financing in place. The company has met with financing banks in recent weeks to discuss its options, but the landscape for buyouts of retailers is difficult, due to uncertainty clouding the industry.

The special committee requested that the Nordstrom family group provide an indication of the price it is willing to pay for a deal, without finalizing its financing, according to documents filed with regulators on Monday afternoon.

The filing outlined from where the family group may get the capital needed to fund a deal.

Michael Corkery of The New York Times reported that the retailer has outperformed others:

Nordstrom has managed to avoid some of the pitfalls of other clothing and apparel stores by taking a conservative approach to opening new stores. But through the fall, the company still had trouble lining up financing to go private, as banks and other lenders waited to see how Nordstrom and other retailers weathered the holidays.

The company reported a strong Christmas shopping season with sales increasing, but profit fell as the company continued to invest in new initiatives.

On Monday, the family said it had received proposals from 10 lending firms to provide up to $7.5 billion in debt financing. The family group also said it had received a commitment from the retail-focused private equity firm Leonard Green to provide up to $2 billion in financing.

The family group that made the bid — including the company’s co-presidents, Blake W. Nordstrom and Peter E. Nordstrom — owns about 30 percent of the shares.