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Renewed Take-Private Efforts Send Nordstrom Stock on the Move

Is the Nordstrom family thinking of another go at taking Nordstrom Inc. private?

On a day when U.S. equity markets fell after the Federal Reserve cut rates by a quarter of a point because Wall Street was hoping for additional cuts down the road, shares of Nordstrom Inc. were the outlier, spiking up nearly 7.9 percent.

Nordstrom shares rose on a report that the founding family was assembling a plan to acquire  additional shares that would give it more than a 50 percent majority stake in the company, higher than its current 34 percent stake.

Nordstrom executives could not be reached for comment. News of the possible plan by the family to acquire more shares was first reported by the Wall Street Journal.

The Nordstrom family originally explored the possibility of taking the company private in June 2017, when shares of the retailer were trading around $40. The thinking was that it would be easier for them to make investments connected to building the business, such as the ability to test concepts that aren’t necessarily guaranteed to pan out, without the pressures of being in a glass fishbowl comprised of the watchful eye and criticism of investors, who are known to sell off shares when quarterly results don’t match their expectations.

At one point in 2017 it was thought that the family was close to inking a deal with private equity firm Leonard Green & Partners that would amount to about $7 billion to $8 billion in debt to finance the deal.

But that partnership never materialized, and since then Leonard Green has been moving away from investments in retail. And there was a big question over just how comfortable would family members be with a debt level as high as $7 billion and more.

That’s because of the risk of being over leveraged in case the economy tanks and sales don’t materialize as expected. But by October of the same year, the family put on hold the idea of taking the company private, and said it would revisit the idea in 2018 after the holiday selling season concluded.

Hedge fund investors who held stakes in Nordstrom at the time were banking on a good holiday season to give the retailer a better shot at securing financing. At the time, a deal at $47 a share was deemed doable as far as the debt load was concerned. The hedge fund investors were instead hoping for at least $50 a share, if not higher.

In 2018, the family offered $50 a share, but the company’s board rejected it as too low and in March shelved talks with the family.

Shares of Nordstrom on Wednesday closed up 7.9 percent to $33.11.

In May, Nordstrom cut its 2019 sales forecast after a first-quarter revenue miss. The company attributed the miss to the execution of certain strategies, such as the rollout of Nordy Club, its enhanced loyalty program.

The retailer last year opened New York City men’s store, its first foray into the fashion capital, and is on track to open its flagship women’s store in the city this October. It also plans to open more Nordstrom Local sites, its neighborhood concept hubs.

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