Nordstrom Adopts A Poison Pill

The Mexican department store retailer Liverpool recently acquired 9.9% of Nordstrom’sJWN
stock as an investment for their dormant funds. While we believe that Nordstrom’s management did not expect this benign move, it quickly adopted a shareholder rights plan (also known as a poison pill). Such a move usually makes it costlier to take over a company.

Nordstrom’s board of directors indicated that the plan was adopted to protect the interests of the company whenever an unwelcome investor is seeking to accumulate sufficient stock to gain control of the company. However, management indicated that the plan was not adopted in response to any action.

The rights plan generally is effective immediately and will be effective for one year. The plan becomes exercisable only if a person or group acquires ownership of 10 percent or more of the outstanding shares of Nordstrom’s stock in a transaction not approved by the Nordstrom board.

Who is Liverpool?

Liverpool, or El Puerto de Liverpool, is a large Mexican company. The name comes from the port in England from which most of its merchandise is shipped to Mexico. Founded in 1845, it has today a portfolio of many different store brands: 122 department stores called Liverpool, 167 Suburbia stores as well as 50 Gap, Banana Republic, William Sonoma, West Elm, and Pottery Barn stores. Sales in 2021 were 151 Billion Mexico Pesos ($7.8 Billion). It has an estimated 40,000 associates. Chief executive officer is Mr. Graciano Guichard Michel.

The Liverpool stores typically carry an assortment of high fashion merchandise. Fashions from France, England, and the United States can be seen there, and models like Valeria Mazza, Eva Herzigova, Gisele Bündchen, and Heidi Klum have been featured in their ads.

If an unwanted acquisition is initiated, rights holders can purchase Nordstrom shares at a 50 percent discount, thus gaining a majority in any vote thereafter. The rights holders will be able to vote down any unwanted attack. Morgan StanleyMS
is financial advisor to Nordstrom and Sidley Austin LLP is serving as the company’s legal advisor.

POSTSCRIPT: While Liverpool is a fine company, we believe Nordstrom’s management wants to remain independent. The family owns a lot of its company’s stock, estimated at 30 percent. It is unlikely that a friendly deal could be made.