TThe parent company of Saks Fifth Avenue has signed a deal to buy luxury rival Neiman Marcus Group, owner of Neiman Marcus and Bergdorf Goodman stores, for $2.65 billion, with online giant Amazon holding a minority stake.
The new entity would be called Saks Global, which will include the Saks Fifth Avenue and Saks OFF 5TH, Neiman Marcus and Bergdorf Goodman brands, as well as the real estate assets of the Neiman Marcus Group and HBC, the holding company that purchased Saks in 2013.
HBC secured $1.15 billion in financing from investment funds and accounts managed by Apollo affiliates, and a $2 billion fully committed revolving asset-based loan from Bank of America, which is the lead underwriter, Citigroup, Morgan Stanley, RBC Capital Markets and Wells Fargo.
The deal comes after months of rumors that the department store chains were negotiating a deal. But the difference is Amazon’s minority stake, which adds “a little spice” to an otherwise front-loaded pact, according to Neil Saunders, managing director of GlobalData, a research firm.
The pact was announced Thursday after months of rumors that the department store chains were negotiating a deal.
The Wall Street Journal first reported the impending deal on Wednesday.
“For years, many in the industry have anticipated this transaction and the benefits it would bring to customers, partners and employees,” Richard Baker, executive chairman and CEO of HBC, said in a statement. “This is an exciting time in luxury retail, as technological advancements create new opportunities to redefine the customer experience and we look forward to unlocking significant value for our customers, brand partners and employees.”
Both Saks and Neiman Marcus have struggled as consumers have pulled back on purchasing high-end goods and shifted their spending to experiences such as travel and upscale restaurants. The two iconic luxury purveyors also faced stiffer competition from luxury brands, which are increasingly opening their own stores. The agreement should help reduce operational costs and create more negotiating power with suppliers.
Saks Fifth Avenue currently operates 39 stores across the U.S., including its flagship in Manhattan. In early 2021, Saks dismembered your website into a separate company, with hopes of expanding that business at a time when more people were shopping online.
Current Saks.com CEO Marc Metrick will become CEO of Saks Global, leading Saks Global’s retail and consumer businesses and driving strategy to improve the luxury shopping experience.
Neiman Marcus filed for bankruptcy protection in May 2020, during the early months of the coronavirus pandemic, but emerged in September of that year. Like many of its peers, the privately owned department store chain was forced to temporarily close its stores for several months.
Meanwhile, other department stores are under pressure to keep increasing sales.
History Lord and Taylor announced in late August 2020 that it would close all of its stores after filing for bankruptcy earlier that month. It is operating online. Macy’s announced in February this year that it will close 150 unproductive eponymous stores over the next three years, including 50 by the end of the year.
Consumers have proven to be resilient and willing to shop even after a bout of inflation, although behaviors have changed, with some Americans trading down for lower priced goods.
A deal between the two luxury retailers doesn’t solve all problems, especially when luxury consumers look to buy luxury goods online or in luxury brands’ own stores, Saunders said.
“As a larger entity, the negotiating power with brands will be a little better, but even a combined chain would not match the weight and power of the global luxury conglomerates, which would still hold most of the cards,” Saunders said. “As such, there is a risk that the deal could end up creating an even bigger headache for Saks.”
Saunders noted that Amazon’s participation in the business makes sense, as it has ambitions to operate more heavily in the luxury area. The release noted that Amazon will work with Saks Global on innovating the shopping experience. Saunders said Amazon could use its ability to streamline logistics and e-commerce and create an advantage for the new entity in a market where online shopping has become more important to shoppers — especially younger ones, which both chains need do more to attract, he said.
Saks Global will also include HBC’s U.S. real estate assets and Neiman Marcus Group’s real estate assets, creating a $7 billion portfolio of retail real estate assets in premier luxury shopping destinations. Ian Putnam, currently president and CEO of HBC Properties and Investments, will become CEO of Saks Global Properties and Investments, which will manage the company’s portfolio of assets.
Both Metrick and Putnam will report to Baker, who will serve as executive chairman of Saks Global.
This story originally appeared on Time.com read the full story
