Nordstrom Family Bids $3.8 Billion to Take Company Private Amid Retail Sector Headwinds

The family behind Nordstrom, one of the nation’s oldest and most storied department stores, has made a $3.8 billion offer to take the company private, according to a regulatory filing on Wednesday. The move comes as the retail sector faces mounting challenges, including shifting consumer habits and the rising costs of maintaining physical stores.

Led by Erik Nordstrom, CEO, and his brother Pete Nordstrom, executive vice president, the family’s proposal offers shareholders $23 per share in cash. The two brothers represent the fourth generation of Nordstroms to lead the business, which was founded in Seattle in 1901. The deal remains subject to shareholder approval.

This offer reflects the broader struggles in the department store industry, which is contending with inflation, reduced mall traffic, and changing consumer priorities. As shoppers pull back on discretionary spending for items like dresses and handbags, Nordstrom, like many of its peers, is finding it harder to maintain sales momentum. Even Macy’s, the largest department store chain in the country, has announced plans to shutter 150 stores over the next three years, while Saks Fifth Avenue’s parent company revealed a $2.65 billion acquisition of Neiman Marcus in July.

Despite its reputation for premium real estate and exceptional customer service, Nordstrom has not been immune to these difficulties. The company faced headwinds last year, particularly with underperformance at Nordstrom Rack, its off-price division, despite growing demand for discounted goods.

While Nordstrom’s stock has seen a 25% uptick since the start of the year, it remains 27% down over the past five years. The family’s offer represents a nearly 35% premium over the March 18 closing price, just before rumors of a potential deal emerged. However, the current offer provides less than a 1% premium compared to the most recent closing price. The Nordstrom board has established a special committee of directors to review the offer, emphasizing that it will prioritize the best interests of both the company and its shareholders.

Retail experts note that while the modest premium might deter some investors, the family-run nature of the company introduces unique dynamics. Neil Saunders, managing director of GlobalData Retail, explained, "The lack of any real premium would, under normal circumstances, make the offer unattractive. However, as a family-run firm, the dynamics are slightly different."

Financing for the deal is expected to come from a combination of cash, the family’s existing stake in Nordstrom, and $250 million in bank financing. Joining the buying group is El Puerto de Liverpool, a Mexican real estate and department store company, which acquired a nearly 10% stake in Nordstrom in 2022. Nordstrom’s recent quarterly earnings report offered some encouraging signs, with same-store sales on the rise and improved performance from Nordstrom Rack. The company also raised its outlook for the year, with Erik Nordstrom emphasizing progress on key goals, including strengthening both its flagship and off-price divisions.

This is not the first time the Nordstrom family has considered taking the company private. In 2017, they explored a similar move with private equity firm Leonard Green, but financing hurdles stymied the deal in that challenging retail environment.

As the industry continues to evolve, the Nordstrom family’s renewed effort to regain full control of the company reflects both the challenges and opportunities ahead for this long-standing retailer.