Macy's (NYSE:M) shares surged by 20% in U.S. premarket trading Monday following a $5.8 billion buyout offer from Arkhouse Management and Brigade Capital Management.
The investor group proposed a price of $21 per share for the department store operator, according to the Wall Street Journal.
This offer represents a premium of 21% based on Macy's closing stock price of $17.39 on Friday.
The buyout offer could potentially lead to significant changes in the company's future direction and strategy, according to analysts.
“The market likely sees the offer as credible,” analysts at UBS said in a client note.
The report also noted that an investment bank has provided a letter supporting the investor group's ability to raise the necessary funding. It also said that the group may raise its offer, subject to due diligence.
“We're surprised a real-estate focused investor would be interested in buying M given we haven't believed the NPV of M's real estate is worth $21/sh., especially given today's high interest rates. We also believe M is worth less than $21/sh. due to ongoing share loss to Off-Price retailers and other competitors," analysts at UBS added.
Analysts at Citi said Macy’s and other department stores face secular challenges as products they sell “can largely be bought elsewhere.”
“Though we are Neutral on all dept stores, M has been our favorite of the bunch. M has some valuable real-estate including its Herald Sq location, which makes M more attractive as a target. Although the company has monetized some of its real estate, there is likely more that can be done,” they wrote.
Macy's has faced a challenging year, with its stock experiencing a 16% decline.