Saks Parent to Buy Neiman Marcus in $2.65B deal

HBC, the parent of Saks Fifth Avenue, has struck a deal to buy Neiman Marcus Group, the parent company of Neiman Marcus and Bergdorf Goodman, in a $2.65 billion transaction that includes Amazon and Salesforce as minority shareholders.

When the transaction closes, HBC will establish Saks Global, which will include Saks Fifth Avenue, Saks OFF 5TH, Neiman Marcus and Bergdorf Goodman, each of which will continue operations under their respective brands.

Saks Global will combine HBC’s US real estate assets and Neiman Marcus Group’s real estate assets, creating a $7 billion portfolio that will be managed by Ian Putnam, currently the president and CEO of HBC Properties and Investments.

Currently there are no plans to close any of the 39 Saks Fifth Avenue stores and 95 Saks Off 5th discount stores. Neiman’s 36 department stores, two Bergdorf Goodman stores and five Last Call discount stores are also expected to remain open.

“This is a real estate transaction, it’s not just about ‘let’s merge,’” Fashion Institute of Technology professor Shawn Grain Carter told the Washington Post. “It’s about where these leases are, in what areas, and in what malls. … To the customer, they’re not going to know it’s one holding company that owns” both Saks and Neiman Marcus.

The combined company will have about $10 billion in annual sales and more than 150 locations. For comparison, LVMH Moet Hennessy Louis Vuitton, which owns Louis Vuitton and dozens of other brands, had sales of about $94 billion last year, the Wall Street Journal reported.

The purchase price will be funded by a combination of equity capital from new and existing shareholders and debt facilities. Amazon is taking a minority stake in the new company and plans to provide it with technology and logistical expertise. Salesforce will also become an investor at the deal’s closing

Meanwhile, Rhone Capital, a transatlantic middle-market private equity firm, will continue as the active lead investor in Saks Global, while global software investor Insight Partners, an investor in Saks.com, will be a shareholder in the new company.

Other investors participating in the deal, according to the WSJ, include Abu Dhabi Investment Council and NRDC Equity Partners, a private-equity firm run by Richard Baker, HBC’s executive chairman, and his son Jack Baker. Affiliates of Apollo Global Management are providing $1.15 billion in debt financing.

The Boards of Directors of HBC and Neiman Marcus Group have approved the transaction, which is subject to the receipt of required regulatory approvals, and other customary closing conditions.

The deal comes amid a slowdown in luxury goods in recent years as even well-heeled shoppers struggle with inflation. Bain & Co. estimates that luxury spending in the Americas fell 8% in 2023 compared with the previous year.  Another metric provided by Bank of America shows that luxury spending was down 12% in March from the same period a year ago. At the same time, department stores in general are under growing pressure as they increasingly lose relevance in the changing retail landscape.

The merger between the two luxury brands are expected to provide stability in this uncertain environment.

“This is an exciting time in luxury retail,” HBC CEO Richard Baker said in prepared remarks, pointing to technological advancements that can “redefine” the customer experience.