Saks Owner Nears $2.65B Acquisition of Neiman Marcus

In a significant move within the retail industry, Hudson’s Bay Co., the owner of Saks Fifth Avenue, is reportedly close to finalizing a $2.65 billion acquisition of Neiman Marcus Group. This merger aims to unite two of America’s largest luxury department store chains to better navigate the challenges of a slowing industry.

The acquisition comes amid increased deal activity in the department store sector, driven by declining share prices and valuable real estate holdings. Hudson’s Bay, which owns its namesake Canadian department store chain, sees potential in Neiman Marcus’s real estate and market positioning. Geographically, Saks and Neiman Marcus have minimal overlap, with Saks being more prominent on the East Coast and Neiman having a larger presence in the southern and western U.S.

The deal, which has been in the works for years, gained momentum after Neiman Marcus declared bankruptcy in 2020. This restructuring made the company a more attractive target for acquisition, especially as luxury sales have weakened recently. The new ownership group, including Pacific Investment Management Co., Davidson Kempner Capital Management, and Sixth Street Partners, is looking for a quicker return on investment rather than a prolonged retail turnaround.

Marc Metrick, CEO of Saks Fifth Avenue’s online operations, is expected to lead the merged companies. The acquisition, anticipated to be announced shortly, represents the culmination of prolonged negotiations between the two privately held competitors.

Hudson’s Bay is not acting alone. Amazon.com Inc. and Salesforce Inc. are set to facilitate the acquisition by taking minority stakes in a newly formed entity called Saks Global, according to a person familiar with the matter. This new company will manage the combined operations, including 39 Saks Fifth Avenue stores, 36 Neiman Marcus locations, and two Bergdorf Goodman stores in Manhattan. Additionally, the deal aims to reduce costs and boost profitability by leveraging combined bargaining power with vendors and streamlining supply-chain operations.

Amazon’s involvement is particularly noteworthy. This would be one of Amazon’s first significant investments in a physical retailer since acquiring Whole Foods in 2017. Amazon’s minority stake in Saks Global aligns with its growing interest in the luxury retail sector, adding a strategic dimension to the deal. Salesforce, known for its partnerships with luxury brands like Louis Vuitton and McLaren, will also contribute to the new venture.

Analysts expect the Saks-Neiman deal to attract regulatory scrutiny. Under FTC Chair Lina Khan, the agency has increased merger challenges, including a recent lawsuit to prevent the acquisition of the parent company of Michael Kors by the owner of Coach. This heightened antitrust activity suggests that the Saks-Neiman merger will undergo a thorough examination before final approval.