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Macy’s Settles With Arkhouse on Proxy Fight, but Takeover Possibility Still Looms

Arkhouse Management continues to pursue a takeover of Macy’s and reached an agreement with the retailer on adding two directors of its choice to the Macy’s Inc. board.

Macy’s Settles With Arkhouse on Proxy Fight, but Takeover Possibility Still Looms

The Macy’s Herald Square flagship.

Macy’s Inc. appointed two new independent directors, Richard Clark and Richard L. Markee, ending a proxy fight over control of the retailer’s board with activist investor Arkhouse Management Co.

In turn, Arkhouse withdrew its push to remake the company’s board in more dramatic fashion with nine director nominees who would have been voted on at Macy’s annual shareholders’ meeting on May 17. Clark and Markee were among the nine who had been nominated by Arkhouse for the board.

While the two sides have settled on the board composition, Arkhouse, along with Brigade Capital Management, is still pursuing a takeover of Macy’s. The pair have proposed buying Macy’s Inc. for $24 a share, or $6.6 billion. Macy’s rejected an earlier bid from Arkhouse and Brigade that would have valued the company at $21 a share, or $5.8 billion.

In a generally down day for Wall Street, shares of Macy’s were up 0.9 percent to $19.89 in midday trading on Wednesday.

The Macy’s board continues to engage with Arkhouse and Brigade on the bid, the retailer said. As previously disclosed, the board entered into a confidentially agreement with Arkhouse and Brigade to give them access to internal information that could help them raise their off-price price.

Arkhouse owns a significant stake in Macy’s. On Wednesday, Arkhouse managing partners Gavriel Kahane and Jonathon Blackwell, issued a joint statement that read: “Ric Clark and Rick Markee bring tremendous dealmaking experience to Macy’s board and will be instrumental in maximizing value for shareholders. As a result of our efforts, our buyer group has begun receiving due diligence to progress discussions toward a potential transaction to acquire the company. The appointment of Clark and Markee to the board and the finance committee, which is tasked with reviewing our proposal and any alternative transactions, will ensure that our discussions continue to be constructive and that our proposal is treated seriously and expeditiously. We appreciate the board’s engagement and look forward to working with them to unlock shareholder value.”

Clark possesses nearly four decades of real estate, mergers and acquisitions and capital markets experience. He is cofounder and managing partner of WatermanClark, a vertically integrated real estate investment and operating company. Earlier, Clark spent three decades at Brookfield Corp. and its predecessors, serving as chairman and chief executive officer of Brookfield Property Group, Brookfield Property Partners and Brookfield Office Properties. Under his leadership, Brookfield’s real estate group grew its assets under management from $5 billion to more than $200 billion. Clark serves as chairman of the Alliance for Downtown New York and the Downtown-Lower Manhattan Association.

Markee has extensive retail experience both as CEO and as a director on public company boards. Markee previously served at Vitamin Shoppe Inc., as nonexecutive chairman, executive chairman and CEO. Earlier, he held senior positions at Toys “R” Us Inc., including vice chairman, and president of Babies “R” Us and Toys “R” Us U.S. Markee serves on the board of Five Below Inc.

Also, Macy’s previously said that Douglas W. Sesler, founder and president of Fair Street Partners, has been appointed as an independent director. Fair Street is a real estate investment and development firm with expertise in converting real estate to alternative uses. Before starting Fair Street, Sesler was head of real estate for Macy’s and led the monetization and development of more than $2 billion of real estate, according to the company.

Tony Spring, Macy’s Inc. CEO and newly appointed chairman of the board, said Clark and Markee “bring leadership experience as well as valuable real estate and retail industry expertise, respectively, that is complementary to that of our other board members. We are confident the company will benefit from their additional perspectives in addition to those of Doug who also joins our board today.”

These Macy’s board changes follow the planned retirements of Jeff Gennette, the former CEO and chairman, and Frank Blake from the board, and bring the number of directors to 15 — 14 of whom are independent.

“The Macy’s Inc. board is committed to acting in the best interests of all Macy’s, Inc. shareholders, and the composition of our board is something we take seriously,” said Paul Varga, lead independent director of Macy’s. The changes on the board, Varga said, “will provide us with a valuable mix of expertise as we continue to oversee the company’s strategic direction.”

Macy’s said its agreement with Arkhouse provides for the withdrawal of Arkhouse’s director nominations, among other customary provisions. Clark and Markee will join the finance committee on the Macy’s board which in addition to its existing responsibilities “will oversee the evaluation of and make recommendations to the full board regarding the acquisition proposal submitted by Arkhouse and Brigade. The agreement between Macy’s and Arkhouse will be filed on a form 8-K with the Securities and Exchange Commission.

Macy’s has Bank of America Securities and Wells Fargo as financial advisers and Wachtell, Lipton, Rosen & Katz is acting as its legal adviser. Macy’s Inc. operates Macy’s, Bloomingdale’s and Bluemercury.

Cadwalader, Wickersham & Taft is serving as legal counsel and Longacre Square Partners is serving as strategic adviser to Arkhouse. Paul, Weiss, Rifkind, Wharton & Garrison is serving as legal counsel and Jefferies Group LLC is serving as financial adviser to the bidders for Macy’s.

Arkhouse is a New York-based investment firm which according to the company, has closed more than $25 billion worth of real estate transactions and has an 18-year shareholder activism track record. Brigade is a New York-based investment firm.

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