The Nordstrom family is sweetening the deal in its search for equity partners willing to join its efforts to take the department store private.
In an effort to attract potential equity partners, the Nordstrom family group, which announced its intention to take the company private last month, has been offering incentives for those looking to get in on the deal, according to Reuters.
One enticement that’s reportedly being considered is offering partners preferred equity, which would give them more dividends and the opportunity to get paid first if stock were to go on sale in the future.
Sources close to the developments list Leonard Green & Partners LP, Apollo Global Management LLC and KKR & Co LLP among the interested parties.
[Read about other department store chain plans for reinvigorating their businesses: Transformation Nation: A Comparison of Department Store Survival Plans]
The group, which is comprised of co-presidents Blake W. Nordstrom, Peter E. Nordstrom, and Erik B. Nordstrom, president of stores James F. Nordstrom, chairman emeritus Bruce A. Nordstrom, and Anne E. Gittinger, has not commented on the matter.
The unnamed sources also say the family has approached sovereign wealth funds, public pension funds as well as wealthy family investors to raise $1 billion in equity. Further, the group is reportedly considering using $7 billion to $8 billion in debt financing to fund the bid.
The impetus behind these developments is a desire to invest in areas of the business that are challenging to do as a public company. The unnamed insiders say the plan is to bolster e-commerce, close some stores while renovating others, and grow the Rack off-price fleet, which currently has 221 locations.
[See how the rapid rate that off-price stores are growing: Infographic: Off-Price Store Growth]
While going private might make these maneuvers easier to achieve in some ways, some analysts are wary of buyouts in the retail sector, as quite a few apparel stores have succumbed under an insurmountable amount of debt in recent months while others look to be barely hanging on. One key example is Neiman Marcus, a direct competitor of Nordstrom. That department store has about $5 billion in debt following a buyout in 2013, which has severely limited its options. Similar situations took down Gymboree and Rue 21, both of which have filed for bankruptcy protection recently.