HBC, parent company of Saks Fifth Avenue, announced July 4 it agreed to acquire Dallas-based Neiman Marcus Group (NMG), parent company of Neiman Marcus and Bergdorf Goodman, for an enterprise value of $2.65 billion.
The main sellers are investment firms Davidson Kempner Capital Management, Sixth Street Partners and Pacific Investment Management, which have owned the company it emerged from bankruptcy in 2020.
NMG has more than 5.1 million gross square feet of store operations in the U.S., including 36 Neiman Marcus stores, two Bergdorf Goodman stores and five Last Call stores. It also has an online store.
The transaction has to clear antitrust regulators. The purchase price is expected to be funded by a combination of equity capital from new and existing shareholders and debt facilities.
HBC has secured a $1.15 billion fully committed term loan financing from investment funds and accounts managed by affiliates of Apollo and a $2 billion fully committed revolving asset based loan facility from lead underwriter Bank of America as well as Citigroup, Morgan Stanley, RBC Capital Markets and Wells Fargo.
Amazon will be an investor in Saks after the close while middle-market private equity firm Rhône Capital will continue to be the active lead investor. Insight Partners, an investor in Saks.com, will be a shareholder in the new company. Salesforce will also become an investor at closing.
When the transaction closes, HBC plans to establish Saks Global, a combination of luxury retail and real estate assets, including Saks Fifth Avenue, Saks OFF 5TH, Neiman Marcus and Bergdorf Goodman, each of which will continue operations under their respective brands.
HBC claims the transaction deleverages the combined enterprise while ensuring that Saks Global will have significant liquidity.
M. Klein & Company is lead financial advisor and capital markets advisor to HBC on the deal and related financings. Solomon Partners is also serving as a financial advisor to HBC with Elm Street Advisors as strategic, commercial and operational advisor and Deloitte as a financial and tax advisor.
Willkie Farr & Gallagher is legal counsel to HBC. The team was led from New York by corporate partners Gregory Astrachan, Michael Brandt and Tej Prakash; also involved were finance partner Viktor Okasmaa; and finance counsel Michael Wolynski.
J.P. Morgan and Lazard are NMG’s financial advisors while Sullivan & Cromwell is its legal counsel. Berenson & Company is financial advisor to Insight Partners.
Tom Mattei is NMG’s chief legal officer, corporate secretary and chief compliance officer. Six months ago, he was promoted to replace then-CLO Hannah Kim, who is now at Circana, which helps brands and retailers unlock growth. He was previously CLO at Fort Worth-based Farmer Brothers, a national coffee roaster, wholesaler, equipment servicer and distributor of coffee, tea and culinary products.
Tracy Preston, who led NMG’s legal efforts through bankruptcy court in 2020, is now CLO at Macy’s. Lawyers from Kirkland & Ellis and Jackson Walker handled the restructuring.
Neiman Marcus is a fashion icon in Texas. In 1907, Herbert Marcus, sister Carrie Marcus Neiman and her husband A.L. Neiman opened the first Neiman Marcus store to “fashionably clothe” Dallas, “pledging fashion, quality, superior values and unparalleled service, which are still upheld today,” the company website says. “Neiman Marcus is Texas with a French accent,” Vogue wrote in 1953.
For the next six decades, the Marcus family led the management of Neiman Marcus, the last one being Stanley Marcus (“Mr. Stanley,”), who guided Neiman Marcus through the first expansions, developed nationally recognized advertising and sales promotion events and pursued luxury merchandise around the world. He served as president and CEO until 1969, when the company was sold to Carter Hawley Hale Stores Inc., and he was named executive VP in charge of the specialty store division. He served as chairman emeritus of the company until his death at the age of 96 in 2002.
In 1999, Carter Hawley Hale spun the chain off as a standalone entity and then, in 2005, it was sold to private equity firms Texas Pacific Group and Warburg Pincus. In 2013, it was sold again for $6 billion to Ares Management and the Canada Pension Plan Investment Board and two years later, it went public. In 2020, it filed for bankruptcy.
Richard Baker, HBC’s executive chairman and CEO, said in a statement that many in the industry have for years expected this deal and the benefits it would drive for customers, partners and employees.
“This is an exciting time in luxury retail, with technological advancements creating new opportunities to redefine the customer experience, and we look forward to unlocking significant value for our customers, brand partners and employees,” he continued.
Current Saks.com CEO Marc Metrick will become CEO of Saks Global.
Saks Global will include HBC’s U.S. real estate assets and those of Neiman Marcus Group, creating a $7 billion portfolio of retail real estate assets in luxury shopping destinations. Ian Putnam, president and CEO of HBC Properties and Investments, will become CEO of Saks Global Properties and Investments, which will manage the company’s assets. Metrick and Putnam will report to Baker, who will serve as executive chairman of Saks Global.
Upon closing of the transaction, HBC’s Canadian business will be recapitalized as a standalone entity, separate from Saks Global, with reduced leverage and enhanced liquidity. HBC will continue to wholly own its Canadian retail and real estate assets, including Hudson’s Bay, which operates TheBay.com and the Hudson’s Bay network of stores, as well as a C$2 billion real estate portfolio.
Geoffroy van Raemdonck, CEO of Neiman Marcus Group, said the announcement is a testament to its team’s unwavering commitment to building rewarding customer relationships, driven by our differentiated business model.
“We believe this is a proactive choice in an evolving retail landscape that will create value for our customers and brand partners,” he noted. “With our complementary capabilities and a new long-term capital structure, the combined group will position our iconic Neiman Marcus and Bergdorf Goodman brands for continued success.”
HBC said Saks Global will be well positioned to meet luxury consumers’ evolving expectations by investing in the luxury shopping experience, ensuring that customers can seamlessly access a broad fashion assortment through their channel of choice while further driving advancements in online functionality and fulfillment processes while providing greater access to merchandise.
It also aims to leverage first-party data and AI to create individualized online shopping experiences and empower sales associates to better serve customers; support established and emerging brands reach their target customers through its improved ecommerce experience and well-located store fleet; and create value for employees through career development opportunities.