By Abigail Summerville
(Reuters) -An investor group consisting of Arkhouse Management and Brigade Capital has made a $5.8 billion offer to take department store chain Macy's (NYSE:M) private, according to a person familiar with the matter on Sunday.
Arkhouse Management, a real-estate focused investing firm, and Brigade Capital Management, a global asset manager, submitted a proposal to acquire the Macy's stock they don't already own for $21 a share on Dec. 1, the person said. The Wall Street Journal reported the offer earlier on Sunday afternoon.
The offer for the Bloomingdale's parent is a 20.76% premium from its closing at $17.39 on Friday.
Macy's shares were trading at $20.13, or up nearly 16% on Monday. Fellow department store operators Kohl's (NYSE:KSS) and Nordstrom (NYSE:JWN) also rose about 6%.
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 note.
J.P. Morgan analysts estimate Macy's total real estate value at about $8.5 billion, or $31 per share, including the iconic Herald Square property worth about $3 billion.
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 WSJ report said, adding that an investment bank has provided a letter supporting the group's ability to raise the necessary financing to get through the deal.
Macy's and Brigade declined to comment, while Arkhouse did not respond to Reuters request for comment.
The retailer crushed analysts' estimates for quarterly profit on lower inventories and strong demand for beauty products in November, signaling that attempts to trim inventory from 2022 highs were finally working ahead of the all-important holiday shopping season.
Macy's has a market capitalization of about $4.77 billion and its shares are down nearly 15.79% this year.
It is unclear whether Arkhouse and Brigade have the resources to execute on a deal of such a size, given that they have not previously done anything of this magnitude.
A $2.4 billion bid that a group of investors led by Arkhouse submitted two years ago for real estate investment trust Columbia Property (NYSE:CXP) Trust was unsuccessful. Pimco subsequently acquired Columbia Property for $3.9 billion.