As part of the new bid, Arkhouse and Brigade have named Fortress Investment Group and One Investment Management as additional equity partners. The group declined to disclose specifics on planned debt financing, though did say they had “identified large global institutional financing sources for each debt component” to round out a package which will “represent 100 percent of the capital required.”

Pushing back on criticism from Macy’s board over an ability to secure full funding, the group said it expects lenders will finalize their commitments following further diligence. ”We have struggled to understand what reservations the Board might have at this point and urge the Company to engage with us in good faith with the goal of reaching a transaction that would unlock significant value for all stockholders,” Arkhouse adds.

Macy’s Responds

Arkhouse and Brigade first approached Macy’s in December with an unsolicited $5.8 billion offer. At the time, the group threatened to take its offer to shareholders if the company didn’t engage.

In January, Macy’s formally rejected the proposal. Late last month, the Arkhouse-led group set the stage for a proxy contest with nominations of nine candidates to Macy’s board, along with a statement criticizing "the Board's history of poor performance.”

Macy’s issued its latest statement this Sunday, saying it would “carefully review and evaluate” the improved proposal, though the company has previously indicated it’s prepared to fight Arkhouse if needed.

Arkhouse Managing Partners Gavriel Kahane and Jonathon Blackwell, in a statement released alongside their improved proposal, said, “We remain frustrated by the delay tactics adopted by Macy’s Board of Directors and its continued refusal to engage with our credible buyer group … Nonetheless, we are steadfast in our commitment to execute this transaction.”

Rapid Reversal

Founded in 1858 as R.H. Macy & Co., Macy’s grew from its roots as a small New York dry goods store into an American cultural icon. For much of its life, it remained just that – a storied New York City department store that many in the U.S. thought they’d never visit.

That changed with the launch of the retailer’s national expansion strategy at the start of the 21st century. An aggressive ten-year period of rival chain and single-store acquisitions grew the business to a peak of nearly 900 locations across 45 states.

Macy’s unraveling is now progressing nearly as quickly as its ascendancy. A combination of discount retailers, high-end brands, and Amazon-led online competitors has pressured the business from all sides. With no more immunity than other legacy retailers, Macy’s has now lost more than a quarter of its market share since 2012.

UBS analyst Jay Sole doesn’t see this trend stopping any time soon. “Each of these groups has major advantages over Macy’s in either price, product, or service.” He adds, “It's unlikely Macy’s can change this dynamic. We model revenues falling at a high-single-digit annual rate on average over FY24-28E.”

Someone’s Got it Wrong

In response to December’s approach, Macy’s management launched a new restructuring initiative and long-term revitalization plan named “Bold New Chapter.” The headline strategy: closure of 150 Macy’s brand stores over the next three years, with additional investment in new locations for the company’s better-performing upscale Bloomingdale’s and Bluemercury brands.

Arkhouse, shareholders, and analysts have all expressed skepticism.

In reference to the company’s various post-proposal initiatives, Arkhouse said, “The stock price selloff following these announcements is a strong indication of shareholder concern about maintaining the status quo.” Managing partner Gavriel Kahane adds, “I hope we get to close on the company before they start these store closures.”

His position may be two-pronged:

1. UBS’ Sole thinks the Bold New Chapter plan could just accelerate Macy’s decline, noting that “the store closures will lead to further share loss which won't be offset by the additional growth initiatives.”

2. The store closure strategy also contemplates a liquidation of between $600 to $750 million of Macy’s newly empty locations. Sole says the plan “erodes bulls' thesis [that Macy’s] is a real estate play since Macy’s will have fewer assets left to monetize as time goes on.”

Kahane aknowledges the real estate angle, but disputes speculation that his firm is interested only in a store liquidation. “So we’re clearly here for the real estate, right,” he said. “We are here because we think they have a lot of real estate on the balance sheet, and that real estate is valuable because it has a great tenant in it.”

Kahane says his group’s investment thesis is focused on a turnaround in the department store business, which he feels is a more realistic undertaking for a privately-held Macy’s.

Others have wondered whether the current back-and-forth is really part of a strategy designed to prompt another buyer to come in on top of the Arkhouse-led group.

Arkhouse disputes this as well. “I will feel so much worse if someone comes in and beats us here,” said Kahane. “I’d also be much more surprised,” he adds.