Macy's shares jump as investors offer $5.8bn for US department stores 

Macy's also owns Bloomingdale's department store

Macy's shares shot up by 16% on Monday.

An investor group consisting of Arkhouse Management and Brigade Capital has made a $5.8bn (€5.4bn) offer to take department store chain Macy's private, according to a person familiar with the matter. Macy's shares shot up by 16% on Monday, boosting rival store operators. 

Arkhouse Management, a real-estate-focused investing firm, and Brigade Capital Management, a global asset manager, submitted a proposal to acquire the Macy's shares they do not already own, the source said. The offer for the Bloomingdale's parent is a 21% premium from its closing last week. 

The investor group already has a big stake in Macy's through Arkhouse-managed funds and has discussed the proposal with the department store chain, whose board subsequently met to discuss the offer. It is not clear how the retailer views the proposal, the person familiar with the matter said.

"The buyout group is undoubtedly interested in Macy's large real estate portfolio, which has attracted activists and potential buyers in the past," Morningstar analyst David Swartz said in a research note. 

JP Morgan analysts estimate Macy's total real estate value at about $8.5bn, including the iconic Herald Square property worth about $3bn. 

Arkhouse and Brigade believe Macy's is undervalued in the public markets and have indicated a willingness to raise the offer subject to due diligence, the Wall Street Journal reported, adding an investment bank had provided a letter supporting the group's ability to raise the necessary financing to get through the deal.

The retailer crushed analysts' estimates for quarterly profit on lower inventories and strong demand for beauty products in November, signalling attempts to trim inventory from 2022 highs were finally working ahead of the all-important holiday shopping season.

Macy's has a market capitalisation of about $4.7bn and its shares are down nearly 16% this year. It is unclear whether Arkhouse and Brigade have the resources to execute on a deal of such a size, given they have not previously done anything of this magnitude.

A $2.4bn bid a group of investors led by Arkhouse submitted two years ago for real estate investment trust Columbia Property Trust was unsuccessful. Pimco subsequently acquired Columbia Property for $3.9bn. 

• Reuters