Macy's (M) -) shares soared in early Monday trading following reports that suggest the iconic retailer could be sold to a group of private investors for as much as $5.8 billion.
The Wall Street Journal first reported the private equity interest, with Reuters following suit, as both indicated buying interest from real estate investor Arkhouse Management and asset manager Brigade Capital Management.
The collective group on Dec. 1 submitted a buyout proposal that priced Macy's at $21 a share, the reports indicated, a 32.4% premium to the retailer's closing price on Nov. 30.
Shares in the group have since rallied nearly 10% to their Friday closing price of $17.39 each, pegging its overall market value at around $4.8 billion.
Macy's posted much-better-than-expected third-quarter earnings in early November. A stronger focus on reducing inventory enabled the Bloomingdale's owner to widen profit margins and post a surprise profit of 21 cents a share, even as sales fell 7.1% to $4.86 billion.
Broader attraction: real estate portfolio
The broader attraction of the group, however, may reside in its U.S. real estate portfolio, which was last valued at around $8.5 billion.
Activist investors have targeted Macy's real estate portfolio in the past as well, with Starboard Value's Jeff Smith in 2017 making the case for splitting off the group's retail operations from its real estate assets.
Macy's would raise cash by selling a minority interest in the joint ventures and it could later consider an initial public offering for one or both of them, Smith argued. That would enable it to pay down debt while maintaining its regular dividend payments.
"Obviously, we look at our portfolio very closely and what's the value to operate in a particular unit, what's the monetization opportunity with that," Macy's CEO Jeff Gennette told investors on a conference call Nov. 16.
"The thing that you're hearing from us is really taking a full market view and really looking at all of our assets that serve customers in the market, and that's our digital assets, that's our mall-based assets, as well as this emerging opportunity that we see in small-door format," he added.
Macy's shares were marked 16% higher in early Monday trading to change hand at $20.22 each, a move that would value the group at around $5.5 billion.
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