Saks Fifth Avenue Parent Company Acquires Neiman Marcus in $2.65 Billion Deal with Amazon Minority Stake

In a significant move within the luxury retail sector, the parent company of Saks Fifth Avenue, HBC, has announced its acquisition of upscale rival Neiman Marcus Group for $2.65 billion. The deal, which has been in negotiations for about a year, will also see online giant Amazon holding a minority stake in the newly formed entity, Saks Global. The merger aims to create a luxury powerhouse amidst an increasingly fragmented market, with various players ranging from online marketplaces to luxury brands opening their own stores.

Saks Global will encompass the Saks Fifth Avenue and Saks OFF 5TH brands, as well as Neiman Marcus and Bergdorf Goodman. The individual stores will continue to operate under their respective brand names. Additionally, the real estate assets of Neiman Marcus Group and HBC will be included in the new organization. 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 from Bank of America, with Citigroup, Morgan Stanley, RBC Capital Markets, and Wells Fargo acting as underwriters.

The involvement of Amazon as a minority stakeholder adds an unexpected twist to the anticipated agreement. Amazon will collaborate with Saks Global, providing expertise in logistics and personalization technology. Furthermore, cloud-based software powerhouse Salesforce will also become an investor at the closing of the deal.

The CEO of Saks’ e-commerce business, Marc Metrick, will assume the role of CEO of Saks Global. Metrick highlighted the increasing consumer demand for easier access to designer products, streamlined shopping experiences, and personalized services. The merger aims to position Saks, Neiman Marcus, and Bergdorf Goodman to meet these evolving consumer expectations.

Both Saks and Neiman Marcus have faced challenges as shoppers have shifted their spending towards experiences and luxury brands have opened their own stores. The merger is expected to reduce operating costs, enhance negotiating power with vendors, and provide shoppers with improved access to a wider range of designers. The utilization of artificial intelligence will also enable more personalized 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 the merger addresses some challenges faced by luxury retailers, it does not fully resolve all issues, particularly in the online luxury goods market and competition from global luxury conglomerates. However, Amazon’s stake in the business aligns with its ambitions to expand its presence in the luxury sector. By leveraging its logistics and e-commerce capabilities, Amazon aims to provide an advantage to the new entity, especially among younger shoppers.

In addition to the retail brands, Saks Global will also manage 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 assume the role of CEO of Saks Global Properties and Investments.

The acquisition marks an exciting time in luxury retail, with the potential to redefine the customer experience through technological advancements. The deal is expected to unlock significant value for customers, brand partners, and employees, according to Richard Baker, HBC’s executive chairman and CEO.