By Savyata Mishra and Abigail Summerville
(Reuters) -Macy's is facing a board challenge from Arkhouse Management after the investment firm nominated nine director candidates just weeks after the retailer rejected a go-private bid from Arkhouse and its partner Brigade Capital.
Arkhouse on Tuesday announced its nominees, including executives with retail, real estate and capital markets experience, to the department store's 14-member board.
"The Board's history of poor performance and continued refusal to engage constructively with our credible and motivated buyer group have led us to the decision to nominate a slate of highly qualified, independent directors to reconstitute Macy’s Board," Arkhouse said in a statement.
Arkhouse said that it and its affiliates have an economic exposure of 4.4% to Macy's (NYSE:M).
The move comes after Macy's announced on Jan. 22 it had rejected the $5.8 billion offer from Arkhouse and Brigade, on concerns over valuation, and that it was in talks with them for more information on deal financing.
Arkhouse said on Tuesday that it had provided additional financing details, including names of highly regarded equity partners – which have more than $75 billion in combined assets under management – for the 50% equity component of the transaction.
Macy's, which owns Bloomingdale's, is struggling with weak demand as customer cut back spending due to elevated inflation and high borrowing costs.
But the company beat market expectations for quarterly results in November on efforts to trim inventory and strong demand for its beauty products. Macy's new CEO Tony Spring also just took the helm on Feb. 4 after leading Bloomingdale's and Bluemercury.
Macy's signaled that it is prepared for a proxy fight. Since proxy contests can be expensive and time consuming many companies try to find ways to settle the fight before investors are asked to vote on who should sit on their board.
At the same time, some analysts think new blood could be helpful for the company.
"Macy's parts could be worth more than the whole under fresh activist management and new direction with much value to be unlocked from the real estate it sits on," said Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors.
The company, famous for its annual Thanksgiving Day parade, said it would evaluate Arkhouse's director candidates and that it was committed to "long-term value creation."
Shares of the New York-based company, which is yet to decide on a date for its 2024 annual meeting, were down 1.4% on Tuesday. Shares are down around 7% in the last year.