In a strategic move aimed at revitalizing its business away from the public eye, Nordstrom, an iconic American department store chain, has announced a $6.25 billion deal to go private. This historic transaction is spearheaded by the founding Nordstrom family in partnership with Mexican retailer El Puerto de Liverpool, marking a landmark moment in the company’s history.

Key Details of the Deal

The deal, expected to close in the first half of 2025, involves the acquisition of all outstanding shares of Nordstrom’s common stock for $24.25 per share. The Nordstrom family (which currently controls about a third of the company) will hold a majority ownership stake of 50.1%, whereas Liverpool will own 49.9%. Financing for the transaction will come from a mix of family and Liverpool equity, company cash reserves, and new financing arrangements.

Nordstrom’s board of directors unanimously approved the deal, with the exception of Erik and Pete Nordstrom who recused themselves. Erik and Pete Nordstrom recused themselves from voting on the transaction to avoid any potential conflicts of interest. As members of the Nordstrom family, which is directly involved in the buyout deal, they stood to personally benefit from the transaction. By stepping away from the vote, they ensured that the board's decision-making process remained impartial and focused on the best interests of all shareholders. This step is standard practice in corporate governance when directors have a vested interest in a deal.

The agreement still requires regulatory approvals and support from two-thirds of Nordstrom shareholders, particularly those unaffiliated with the family or Liverpool.

Why Go Private?

Nordstrom's all-time high stock closing price was $58.49 in 2015. Today, the price is less than half. The company's annual revenue peaked in 2019 but has never recovered from the effects of the Covid-19 pandemic. Over the last five years, Nordstrom’s stock dropped by 40% while broader market indices such as the Russell 1000 rose by over 80%. Like many other department stores, Nordstrom has faced competition from online giants such as Amazon, discount retailers such as TJ Maxx, and fast-fashion retailers such as Shein. Its off-price chain, Nordstrom Rack, has also shown inconsistent performance.

Going private allows Nordstrom to restructure and innovate without the pressures of quarterly earnings reports and the risk of activist investors. In the public market, companies are accountable to shareholders, who often focus on short-term gains rather than long-term strategies. Activist investors, in particular, are shareholders who buy significant stakes in a company to push for changes they believe will increase its value, such as cost-cutting measures or leadership changes. While their actions can lead to positive outcomes, they can also disrupt a company’s ability to focus on long-term goals, as management may feel pressured to prioritize immediate profitability over strategic innovation. For example, Macy’s and Kohl’s have faced pressure from activist investors to tighten spending and sell off real estate. By going private, Nordstrom can sidestep this kind of external pressure, allowing its leadership to implement changes at a pace that supports sustainable growth.

El Puerto de Liverpool

El Puerto de Liverpool, one of Mexico’s largest and most successful retail chains, brings a wealth of expertise and resources to the partnership. The retailer bought a nearly 10% stake in Nordstrom back in 2022. The company already operates more than 300 stores and manages franchises for international brands such as Gap, Williams Sonoma, Banana Republic, and Pottery Barn in Mexico. With its strong e-commerce and financial services arms, Liverpool is well-positioned to help Nordstrom diversify and modernize its operations.

For Liverpool, this deal represents an opportunity to expand its footprint beyond Latin America and gain a significant presence in the U.S. retail market. The collaboration demonstrates a shared belief in the potential for Nordstrom’s long-term growth.

More Context

This isn’t Nordstrom’s first attempt to go private. A similar effort in 2018 failed after the board deemed the offer too low. However, the current deal comes at a time when the company’s financials are showing signs of stabilization. Analysts suggest that the take-private move, combined with Liverpool’s investment, could set the stage for a more agile and innovative Nordstrom.

Department stores, once dominant in the retail sector, have struggled to retain their market share in recent decades. However, industry observers argue that Nordstrom’s established brand, coupled with strategic private ownership, could enable the chain to adapt to evolving consumer preferences and regain its competitive edge.

Looking Ahead

By stepping away from the public eye and leveraging Liverpool’s expertise, Nordstrom aims to navigate the complexities of the modern retail environment more effectively. Whether this move will pay off remains to be seen, but it’s a calculated risk that could redefine the company’s legacy.

 

In the Classroom

This article can be used to discuss public and private corporations (Chapter 4: Options for Organizing Business).

Discussion Questions

  1. What factors contributed to Nordstrom's decision to go private?
  2. In what ways might going private allow Nordstrom to innovate and adapt more effectively?
  3. How does Liverpool’s involvement benefit both Nordstrom and the Mexican retailer?

This article was developed with the support of Kelsey Reddick for and under the direction of O.C. Ferrell, Linda Ferrell, and Geoff Hirt.