With Nordstrom Inc. (ticker: JWN) stock now down more than 30 percent in the past three years, the Nordstrom family may be taking its ball and going home. On Tuesday, CNBC reported the Nordstrom family, which owns 31.2 percent of the company they founded, is on the brink of a deal with private equity firm Leonard Green & Partners to take Nordstrom private.
Citing people familiar with the matter, CNBC reported that Leonard Green would provide $1 billion in equity to help the Nordstrom fund the deal.
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Although the Nordstrom family previously discussed its intentions to consider taking the company private in June, Nordstrom stock jumped 5 percent on Wednesday morning on news the potential deal may be nearly complete.
The Nordstrom family is hoping that going private will provide the company with more flexibility to pursue aggressive restructuring initiatives without the fear of shareholder unrest.
Nordstrom isn’t the only U.S. retailer struggling in the current environment. Competition from Amazon.com ( AMZN) and other online retailers has eaten into the profits of traditional shopping mall retailers. Nordstrom’s trailing 12-month earnings per share are down more than 40 percent the past three years. Earlier this year, Credit Suisse estimated that 25 percent of remaining U.S. shopping malls may close within the next five years.
Shareholders of other struggling mall retailers, including Macy’s ( M), J.C. Penney Co. ( JCP) and Sears Holding Corp. ( SHLD), will be watching the Nordstrom deal closely as a potential blueprint for going private themselves. But only one other retailer may be well-positioned to make a similar deal.
The Dillard family owns an 11 percent stake in Dillard’s ( DDS) and could potentially have enough influence to take the company private.
Perhaps the biggest difference between Nordstrom and other struggling retailers is that Nordstrom’s business is still performing relatively well. Nordstrom topped earnings and revenue expectations in the most recent quarter and raised the low end of its full-year guidance.
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Following the strong quarter, KeyBanc Capital Markets analyst Edward Yruma said Nordstrom has “one of the most capable management teams in our coverage” and that a deal to take the company private is “likely,” according to financial media outlet Benzinga. KeyBanc maintains an “overweight” rating and a $55 price target for Nordstrom stock.
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Nordstrom Nearing a Deal to Go Private originally appeared on usnews.com
