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Nordstrom Shares Jump on Report That Leonard Green May Fund Buyout

Shares in the American retail giant surged as much as 12 percent to $50.30 following reports of a buyout, after its store concept received a chilly reception from investors.
Shoppers at Nordstrom | Source: Reuters
By
  • Bloomberg

NEW YORK, United StatesNordstrom Inc. surged as much as 12 percent in late trading on a report that private equity firm Leonard Green & Partners may help fund a buyout, setting the stage for a transaction by the retailer's founding family.

The Nordstrom family members are close to picking Leonard Green to help with the deal, CNBC reported on Tuesday. The firm would provide about $1 billion to help take Nordstrom private, according to the business-news channel.

The stock climbed as high as $50.30 in extended trading in the wake of the report. Nordstrom was down 6 percent this year through Tuesday’s close, hurt by a broader slump in the department-store industry. At the same time, the cost to protect against a default by the department-store chain jumped the most in three months on the prospect that the company could be loaded up with debt to fund a buyout.

The Nordstrom family first said it was considering a buyout in June. The idea is to continue its turnaround plan outside of the glare of public markets, giving them an opportunity to improve sales and test new concepts with less scrutiny.

Leonard Green, based in Los Angeles, declined to comment to Bloomberg News. A representative for Nordstrom didn’t immediately respond to a request for comment.

The Nordstrom family group has been talking to banks about raising between $7 billion and $8 billion in debt to finance the deal, according to CNBC. They’re hoping to submit a formal bid in the next couple of weeks, the channel said.

The report comes a day after Nordstrom’s latest store concept received a chilly reception from investors. The company announced plans to open a small shop in West Hollywood, California, that wouldn’t keep inventory on site. The idea is to let customers try outfits and work with a stylist, but then have the merchandise delivered from another location.

The move puzzled investors, who sent the shares down as much as 5.4 percent on Monday.

Though Nordstrom's sales have slowed, it has generally performed better than most large US department-store chains. Macy's Inc., J.C. Penney Co. and Sears Holdings Corp. have been closing hundreds of stores as they cope with slow mall traffic and a consumer shift online.

Hudson’s Bay Co., owner of the Saks Fifth Avenue and Lord & Taylor chains, also reported weaker results last quarter. The company suffered a deeper-than-expected loss after sluggish sales and heavy promotions took a toll on its profit margin.

Credit-default swaps insuring against losses on Nordstrom bonds climbed 77 basis points to 317 basis points, according to data provider CMA. That means it would cost $317,000 annually to insure $10 million of bonds for five years.

By Nick Turner and Lindsey Rupp, with assistance from Kiel Porter and Alexandra Stratton; Editors: Nick Turner, Nikolaj Gammeltoft

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