Nordstrom family makes $6.25B play to regain control of Seattle giant

Seattle’s Nordstrom family is poised to take control of its namesake company again next year, as its fourth generation attempts to invigorate the family business away from market pressures.

Nordstrom has agreed to be acquired by a coalition of Nordstrom family members and Mexican department store chain El Puerto de Liverpool in an all-cash deal valued at $6.25 billion, according to a news release Monday.

The deal is expected to close in early 2025. Once it’s done, the Nordstrom family will hold a majority stake in the company.

Nordstrom will go private in the deal, which will insulate the company from the fickle ways of Wall Street. The company and its brand are in need of a revival, and that’s easier to accomplish without the pressures of public quarterly financial reports.

“For over a century, Nordstrom has operated with a foundational principle of helping customers feel good and look their best,” Nordstrom CEO Erik Nordstrom said in a news release. “Today marks an exciting new chapter for the business. On behalf of my family, we look forward to working with our teams to ensure Nordstrom thrives long into the future.”

Shareholders are getting a better payout than what was originally pitched. Erik Nordstrom and Chief Brand Officer Pete Nordstrom offered to take the company private for $3.8 billion in early September, less than half of what they offered in 2018.

The Nordstrom brothers, great-grandsons of co-founder John W. Nordstrom, cited their father Bruce Nordstrom’s health earlier this year as a motive for the acquisition, according to a September regulatory filing.

Bruce Nordstrom, the former chairman who helped guide its transformation into a public company in the early 1970s, died in May at age 90.

“Since our founding in 1901, we have been committed to providing our customers with the best possible service – and to improving it every day,” Pete Nordstrom said in a news release. “We look forward to building on that commitment in this next phase of the Company’s evolution.”

If the deal is approved, shareholders will receive $24.25 per share for a total of about $4 billion. The Nordstroms will pick up about $2 billion of the company’s debt.

The Nordstroms will own 50.1% of the company and El Puerto de Liverpool will own 49.9%. The family will have more control despite a bigger contribution from El Puerto de Liverpool, according to Morningstar analyst David Swartz.

“It looks like El Puerto is going to be a passive investor because if they wanted control they could have it,” he said. “The Nordstrom family is only increasing its ownership from about one-third to over half of the company. By agreeing to let the Nordstroms take over 50% El Puerto is going to let the company run as it is.”

El Puerto is a publicly traded company in Mexico, but Swartz said it’s unlikely Nordstrom will be included in quarterly financial earnings calls or investor meetings.

When retailers are acquired by private buyers it can spell doom. There’s the risk that the buyer will scoop it up at a premium and bury it in debt that it can’t overcome. Nordstrom’s deal is different since it’s not being bought by a private equity firm but rather the family that’s overseen the company since its founding.

Mergers and acquisitions also happen in retail because the companies involved aren’t doing well. They’re merging because they have to. But Nordstrom is in better shape than some of its competitors like Macy’s, Saks Fifth Avenue and Neiman Marcus.

Saks recently agreed to acquire Neiman Marcus for $2.65 billion.

Saks and Neiman Marcus have struggled since they’re luxury companies, with stores that are expensive to maintain, according to Swartz. They’re also smaller than Nordstrom.

Nordstrom also has stability on its side. Aside from a few years in the late 1990s, the company has been led by a member of the family since 1901. Macy’s had a CEO change earlier this year after a few rough years for the retailer.

The Nordstroms have a long-term view of the company, Swartz said. They’re looking at how to keep it around for the next generations, a position that has not always gelled with the short-term worries of shareholders.

“I think the Nordstrom family wanted to buy it now while the earnings are a bit depressed,” Swartz said. “They’re confident and they know the business can be more profitable in a few years than it is now and that’s easier to do privately.”

Nordstrom’s operating margin, or its profitability, has been about 4% lately. It’s still profitable, but not at a sustainable level. The company used to report margins of 10%. In an investors note, Swartz said he’s confident Nordstrom could return to pre-pandemic margin levels of 6% by 2027.

The company could reach higher margins by further cutting costs. It recently said it would close offices in Los Angeles and Chicago. Those leases will expire and some employees will relocate to Seattle while most will become remote.

Nordstrom is also opening more of its discounted Nordstrom Rack stores. The main line of department stores still account for a higher percentage of revenue but the Nordstrom Rack sector is growing fast and has been a highlight of financial results lately. The discount division’s sales grew by 10.6% in August, September and October compared to the same three months in 2023.

Nordstrom has opened 23 Nordstrom Rack stores this year, according to its recent earnings report. It has plans to open 15 in 2025 and at least one in 2026.