Arkhouse Macy’s proxy fight continues as deal negotiation progresses

A bid from Arkhouse Management and Brigade Capital to take retailer Macy’s private has moved closer to due diligence after weeks of delay, but the activist group plans to continue its proxy fight while negotiations progress.

Macy’s sent the activist a draft confidentiality agreement earlier this week, after months of meetings and engagements between the two sides, Arkhouse said in a proxy filing Thursday.

Such an agreement is the first step in allowing Arkhouse and Brigade access to Macy’s books, allowing the activists to firm up their financing commitments.

In February, Arkhouse nominated a nine-director slate for election at Macy’s annual meeting. A date for the meeting has not yet been set.

The proxy filing and exhibits show that as the deadline to launch a proxy fight neared, Arkhouse asked Macy’s in February to extend its nominating window to “avoid any heightened tension that may accompany” launching a rival slate.

Macy’s board declined to do so. The company had already rejected Arkhouse’s initial $21 per share bid, saying that the investor group’s financing was uncertain.

Arkhouse raised its bid to $24 per share earlier this month, and revealed it’s backed by Fortress Investment Group and One Investment Management.

The two sides have been negotiating the terms of the agreement this week, the proxy filing shows. Representatives for Macy’s declined to comment.

Macy’s board was “surprised to first learn” of the increased bid through a media request for comment, Macy’s chair Jeff Gennette said in a March 4 letter to Arkhouse and Brigade leadership. In light of the proxy fight and media reports, Gennette said Macy’s board was “puzzled by your request for confidential treatment.”

Nonetheless, one week later Gennette said the board was ready to proceed with due diligence, pending a confidentiality agreement.

“The board remains committed to acting in the best interest of Macy’s Inc. and all our shareholders,” he wrote.