Saks Fifth Avenue parent company buys rival Neiman Marcus for $2.65 billion

The new entity would be called Saks Global and would include the Saks Fifth Avenue and Saks OFF 5TH, Neiman Marcus and Bergdorf Goodman brands, as well as the real estate assets of Neiman Marcus Group and HBC, a holding company that bought Saks in 2013.

HBC has secured $1.15 billion in financing from investment funds and accounts managed by Apollo affiliates, as well as a $2 billion fully committed asset-based revolving loan facility from Bank of America, which is the lead underwriter, Citigroup, Morgan Stanley, RBC Capital Markets and Wells Fargo.

The deal comes after months of rumors that the department store chains were in talks. But Amazon’s minority stake adds “a bit of spice” to a previously expected deal, according to Neil Saunders, managing director of GlobalData, a research firm. Salesforce, a cloud-based software company, will also become an investor at the close.

The deal was announced Thursday after months of rumors that the department store chains had negotiated a deal.

The Wall Street Journal was first to report the impending deal on Wednesday.

“For years, many in the industry have anticipated this transaction and the benefits it would bring to customers, partners and employees,” Richard Baker, HBC’s executive chairman and CEO, said in a statement. “This is an exciting time for luxury retail, with technological advancements creating new opportunities to redefine the customer experience, and we look forward to creating significant value for our customers, brand partners and employees.”

Saks and Neiman Marcus have both struggled as consumers have shifted away from high-end products toward experiences like travel and high-end dining. The two iconic luxury brands have also faced tougher competition from luxury brands, which are increasingly opening their own stores. The deal is expected to reduce operating costs and strengthen negotiating leverage with suppliers.

Saks Fifth Avenue currently operates 39 stores in the United States, including its Manhattan flagship. In early 2021, Saks spun off its website into a separate company, hoping to grow that business at a time when more people are shopping online.

Marc Metrick, currently CEO of Saks.com, will become CEO of Saks Global. He will lead Saks Global’s retail and consumer businesses and drive the strategy to enhance the luxury shopping experience.

Neiman Marcus filed for bankruptcy protection in May 2020, during the early months of the coronavirus pandemic, but emerged in September of that year. Like many of its peers, the privately held department store chain was forced to temporarily close its stores for several months.

Meanwhile, other department stores are under pressure to continue increasing sales.

In late August 2020, Lord & Taylor announced it was closing all of its stores after filing for bankruptcy earlier that month. The retailer is now operating online. Macy’s announced in February of this year that it would close 150 non-performing namesake stores over the next three years, including 50 by the end of the year.

Consumers have proven resilient and willing to make purchases even after a period of inflation, although behaviors have changed, with some Americans moving to less expensive products.

A deal between the two luxury retailers doesn’t solve all the problems, especially when high-end shoppers look to buy luxury goods online or in luxury brands’ stores, Saunders said.

“As a larger entity, the negotiating power with brands will be somewhat greater, but even a combined chain would not match the weight and power of the global luxury conglomerates, which would still hold most of the cards,” Saunders said. “So there is a risk that the deal could end up creating an even bigger headache for Saks.”

Saunders said Amazon’s stake in the company makes sense because the company has ambitions to play a larger role in the luxury sector. The statement said Amazon will work with Saks Global to innovate the shopping experience. Saunders said Amazon could use its ability to streamline logistics and e-commerce to create an advantage for the combined entity in a market where online shopping has become more important to shoppers, particularly younger ones, who both chains need to do more to attract, he said.

Saks Global will also include HBC’s U.S. real estate assets and those of Neiman Marcus Group, creating a $7 billion portfolio of retail real estate assets in premier luxury shopping destinations. Ian Putnam, currently president and CEO of HBC Properties and Investments, will become CEO of Saks Global Properties and Investments, which will manage the company’s portfolio of assets.

Metrick and Putnam will both report to Mr. Baker, who will serve as executive chairman of Saks Global.