In a significant move within the luxury retail sector, the parent company of Saks Fifth Avenue, HBC, has finalized a deal to acquire upscale rival Neiman Marcus Group for $2.65 billion. The acquisition, which includes a minority stake from Amazon, aims to create a luxury powerhouse named Saks Global. This strategic move comes at a time when the luxury market has become increasingly fragmented, with various players vying for consumer attention.
Under the agreement, Saks Fifth Avenue and Saks OFF 5TH brands will merge with Neiman Marcus and Bergdorf Goodman, while the real estate assets of Neiman Marcus Group and HBC will also be included. Notably, the individual stores will continue to operate under their respective brand names.
To finance the deal, HBC has secured $1.15 billion from investment funds managed by Apollo and a $2 billion revolving asset-based loan facility led by Bank of America, with participation from Citigroup, Morgan Stanley, RBC Capital Markets, and Wells Fargo.
The inclusion of Amazon as a minority stakeholder adds a unique element to the anticipated pact. Amazon will collaborate with Saks Global, leveraging its expertise in logistics and personalization technology. Additionally, Salesforce, a cloud-based software powerhouse, will also become an investor.
The CEO of Saks’ e-commerce business, Marc Metrick, will assume the role of CEO for Saks Global. Metrick emphasized that consumers are increasingly seeking easier access to designer products, personalized experiences, and convenient shopping options. This merger aims to position Saks, Neiman Marcus, and Bergdorf Goodman to meet these evolving consumer demands.
Both Saks and Neiman Marcus have faced challenges as shoppers shift their spending towards experiences and luxury brands open their own stores. The deal is expected to reduce operating costs, enhance negotiating power with vendors, and provide shoppers with improved access to a wider range of designers, including emerging ones. The use of artificial intelligence will also enhance personalized shopping experiences for customers.
Saks Fifth Avenue currently operates 39 stores across the United States, including its flagship store in Manhattan. In early 2021, Saks spun off its website into a separate company to expand its online presence. Neiman Marcus, which filed for bankruptcy protection in May 2020 due to the pandemic, emerged from bankruptcy in September of the same year.
While this merger addresses some challenges, it does not fully resolve the issues faced by luxury retailers in the online shopping era. Global luxury conglomerates still hold significant power, and the deal may present new challenges for Saks. However, Amazon’s stake in the business aligns with its ambitions to establish a stronger presence in the luxury market.
The new entity, Saks Global, will also manage HBC’s U.S. real estate assets and Neiman Marcus Group’s real estate assets, creating a $7 billion portfolio of retail real estate assets in top-tier luxury shopping destinations. Ian Putnam, the current CEO of HBC Properties and Investments, will lead Saks Global Properties and Investments.
Richard Baker, HBC’s executive chairman and CEO, expressed excitement about the transaction, highlighting the opportunities presented by technological advancements to redefine the luxury retail experience. The deal is expected to unlock significant value for customers, brand partners, and employees.