Liverpool Seeks to Acquire 49.9% of Nordstrom with a $1.226 Billion Investment

With a planned investment of $1.226 billion, Liverpool seeks to acquire 49.9% of Nordstrom in partnership with the founding family of the iconic American department store chain.

To achieve this, the Nordstrom family and Liverpool plan to create a joint entity. This entity will acquire 49.9% of the company’s shares, while the Nordstrom family would retain its majority 50.1% stake. This strategic move not only aims to optimize the financial structure and ensure operational control but also holds the potential to transform retail dynamics in North America.

Erik Nordstrom and Graciano Guichard are the CEOs of Nordstrom and Liverpool, respectively. Photo: SiiLA.

By: SiiLA News

09/12/2024

Liverpool seeks to become the most significant external shareholder of Nordstrom, an iconic department store chain in the United States. The Mexican company, well-known for its strong presence in the retail sector, announced its intention to increase its stake in Nordstrom from 9.9% to 49.9%. This move, in collaboration with the Nordstrom family—which would retain 50.1% of the company—reflects Liverpool's strategy to strengthen its position in a highly competitive market while expanding its international presence.

In 2022, Liverpool made its first significant investment in Nordstrom, acquiring 9.9% of the outstanding shares through a transaction valued at approximately $303 million (5.9 billion pesos at the exchange rate at the time). This move was part of a geographic asset diversification strategy, leveraging Liverpool's cash surplus and its interest in expanding into the U.S. market, where Nordstrom stands out for its customer experience focus and omnichannel model.

Currently, Liverpool is one of Mexico's leading investors in shopping malls. According to SiiLA, the company occupies 11% of the gross leasable area (GLA) in shopping centers in the country's top retail markets. Nationally, it operates 431 Liverpool and Suburbia stores and participates in the operation of 370 Nordstrom stores.

To date, Liverpool and the Nordstrom family have submitted a non-binding offer to Nordstrom's board of directors after receiving authorization from the company's special committee. The proposal includes buying shares at $23 per share, representing an investment of at least $1.226 billion for Liverpool. The company's own funds would cover part of this investment, while the rest would be financed, including contributions from the Nordstrom family, which would contribute shares and funds to complete the transaction.

As part of the process, Liverpool and the Nordstrom family submitted a formal notice under "Schedule 13-D" to the U.S. Securities and Exchange Commission (SEC), which is mandatory when significant share ownership changes occur. This document is essential to ensure transparency in the merger process and to keep shareholders informed about changes in the control structure.

The Strategy Behind the Merger

Nordstrom began operating as a shoe store in 1901 in Seattle, Washington, United States. Photo: BigStock.

So, is Nordstrom buying itself with Liverpool's help? Essentially, yes. The proposal involves Liverpool and the Nordstrom family acquiring nearly half (49.9%) of the company's shares through a new joint entity, while the Nordstrom family would retain its majority 50.1% stake. Although it may seem like Nordstrom is "buying itself," this is actually a strategy where both parties join forces to maintain control without the involvement of third parties, optimizing the financial structure and ensuring the company's operational leadership.

This comes as Nordstrom is undergoing an adjustment in its financial performance. Between 2021 and 2023, its revenue declined slightly by 4%, from $14.8 billion to $14.2 billion, while its net income dropped by 25%, from $178 million to $134 million.

This scenario represents a strategic opportunity for Liverpool: to increase its stake during a key transition period and leverage Nordstrom's robust omnichannel model to capitalize on a potential recovery.

On the other hand, for the Nordstrom family, the transaction would generate liquidity while maintaining their majority control (50.1%) of the company. Liverpool's investment would provide additional capital and strategic support to strengthen Nordstrom's operational and financial restructuring. Having a major partner like Liverpool would open new opportunities for capital and financing without compromising the family's long-term vision, promising a bright future for both parties.

However, the deal has not yet been finalized. It is subject to several conditions: first, Nordstrom and the involved parties must negotiate and agree on the terms of the final merger. Then, a due diligence process will be necessary to ensure that all financial and operational aspects of the transaction are sound. Additionally, the transaction must receive corporate and regulatory approvals, including a favorable vote from Nordstrom shareholders representing two-thirds of the company's share capital, excluding the shares owned by the buyer group (Liverpool and the Nordstrom family). This process ensures that the offer is fairly evaluated and that the rights of all shareholders are respected before the transaction is finalized.

The alliance between Liverpool and the Nordstrom family reinforces their market leadership and redefines retail dynamics in North America, with potential long-term effects on the industry. For more information on retail market transactions, explore SiiLA Resource or contact us at contacto@siila.com.mx.

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