Saks Fifth Avenue's parent company, Hudson's Bay Company (HBC), announced on Thursday that it will acquire the Neiman Marcus Group in a $2.65 billion deal. This significant transaction will merge two iconic luxury retailers, establishing a new entity called Saks Global, which will include Saks Fifth Avenue, Saks OFF 5TH, Neiman Marcus, and Bergdorf Goodman.
HBC CEO Richard Baker expressed enthusiasm about the merger, stating, "We're thrilled to take this step in bringing together these iconic luxury names. For years, many in the industry have anticipated this transaction and the benefits it would drive for customers, partners, and employees." Baker highlighted that technological advancements would play a crucial role in redefining the customer experience in the luxury retail sector.
As part of the deal, Saks.com CEO Marc Metrick will become the CEO of Saks Global, while Ian Putnam, president and CEO of HBC Properties and Investments, will take on the role of CEO for Saks Global's property and investments business. Both executives will report to Baker, who will serve as executive chairman of Saks Global.
Neiman Marcus Group CEO Geoffroy van Raemdonck described the partnership as a "proactive choice in an evolving retail landscape," acknowledging the challenges traditional brick-and-mortar retailers face in the wake of the e-commerce boom. This merger aims to address those challenges by leveraging combined resources and technological innovations.
The merger comes at a time when the department store segment struggles to attract younger shoppers amid a broader pullback in discretionary spending. The COVID-19 pandemic exacerbated these challenges as consumers shifted their spending towards experiences like dining and travel rather than goods.
The financial backing for this deal includes $1.15 billion in financing from investment funds and accounts managed by affiliates of Apollo and a $2 billion fully committed revolving asset-based loan facility from Bank of America, Citigroup, Morgan Stanley, RBC Capital Markets, and Wells Fargo.
A notable twist in the deal is Amazon's minority stake, which Neil Saunders, managing director of GlobalData, described as adding "a bit of spice" to an otherwise anticipated pact. Amazon's expertise in logistics and personalization technology is expected to enhance the new entity's operations. Salesforce, a cloud-based software company, will also become an investor at closing.
Despite the merger's potential to reduce operating costs and increase negotiating power with vendors, the luxury retail market remains competitive. Saks and Neiman Marcus have both struggled with declining high-end goods sales and stiff competition from luxury brands opening their own stores.
Metrick emphasized that the merger was necessary to meet consumer demands for more access to designer products, easier shopping methods, and personalized experiences. He noted that this combination would position Saks, Neiman Marcus, and Bergdorf Goodman where they need to be for today's consumer.
The new entity, Saks Global, will also include HBC's U.S. real estate assets and Neiman Marcus Group's real estate assets, creating a $7 billion portfolio of retail real estate assets in top-tier luxury shopping destinations. This consolidation is expected to provide shoppers with better access to more designers, particularly emerging ones, and enhance personalized experiences through improved use of artificial intelligence.
Saks Fifth Avenue, which operates 39 stores in the U.S., including its Manhattan flagship, had spun off its website into a separate company in early 2021 to expand its online business. Neiman Marcus, which filed for bankruptcy protection during the pandemic's early months, emerged from it in September 2020 and has since been working to regain its market position.
