U.S. News

KKR Is Considering Making $24 Billion Bid for Macy's: Report


Private equity firm Kohlberg Kravis & Roberts is studying a bid to buy Macy's Inc. for about $24 billion, according to an online trade report published Wednesday.


Macy's shares soared more than 8 percent, the high end of its 52-week per share range of $33.52 to $46.70.

According to Women's Wear Daily, the two parties could agree in principle within a few days. The $52 a share offer may or may not exclude Macy's debt, according to the trade paper, which cited anonymous private equity sources.

WWD also said that it was believed that KKR would keep current Macy's management, including chairman and CEO Terry Lundgren, who orchestrated Federated Department Stores Inc.'s acquisition of May Department Store Co. in 2005. The name was changed to Macy's in June.

WWD also reported that The Principal Investment Area, Goldman Sachs Group Inc.'s private equity arm, and its real estate group are believed to be participating in the negotiations.

Macy's spokesman Jim Sluzewski and David Lilly, a spokesman for KKR, declined to comment on the report Wednesday.

Macy's LBO?

A person close to the situation, who asked not to be named given the sensitivity of the negotiations, said Goldman Sachs was not involved in the talks.

Rumors about a possible buyout of Macy's have driven shares up in recent weeks and are occurring as the department store operator struggles to reinvigorate its business. Last September, the company converted most of its former May Co. stores into Macy's, transforming Macy's into a national department store brand. But the turnaround of the former May stores has not been progressing as well as expected.

Macy's reported last week that same-store sales, or sales at stores opened at least a year, fell 2.7 percent in June. Analysts surveyed by Thomson Financial expected same-store sales to fall just 0.8 percent.

The company also said earnings for the second quarter would be much lower than the year-ago period. Macy's is expected to report financial results on Aug. 6.

Citigroup analyst Deborah Weinswig wrote in a report published July 10 that Macy's appears to be an 'attractive leveraged buyout candidate due to its strong cash flow and real estate portfolio.' She also noted that Macy's continued disappointing results make a Macy's leveraged buyout possible. The company has also blamed its poor results on disappointing home furnishings sales.

KKR, which filed plans to go public earlier this month, has been studying the retail market for a while. In recent weeks, the private equity firm completed its $7.3 billion acquisition of Dollar General Corp., the discount retail chain. The second deal, also completed this month, was the $7.1 billion purchase, along with another private equity player Clayton, Dublier & Rice Inc., for U.S. Foodservice, a division of Dutch supermarket-chain owner Royal Ahold NV.

In May, there was a flurry of reports that KKR was targeting footwear companies Skechers and Genesco to take them private in two separate deals.