Macy’s, the iconic American department store chain, is facing a potential buyout from a consortium of real estate and asset management firms.

Arkhouse Management and Brigade Capital Management have offered to acquire Macy’s for $5.8 billion, or $21 per share, in a letter sent to the company’s board on Dec. 1. The Wall Street Journal first reported the news on Sunday.

The offer represents a 32.4% premium over Macy’s closing price of $17.39 on Nov. 30. Macy’s shares surged 20% to $20.87 in pre-market trading on Monday, indicating that investors are optimistic about the deal.

Macy’s declined to comment.

The company, which operates more than 500 stores under the Macy’s, Bloomingdale’s and Bluemercury brands, has been struggling for years to cope with changing consumer preferences, online competition and the impact of the COVID-19 pandemic.

Macy’s has been trying to turn around its business by closing underperforming stores, cutting costs, investing in e-commerce and digital capabilities, and launching new initiatives such as off-price outlets, loyalty programs and partnerships with third-party vendors.

However, the company’s performance has been uneven, and its stock price has fallen more than 75% from its all-time high of $70.99 in June 2015.

One of the main attractions of Macy’s for potential buyers is its valuable real estate portfolio, which includes its flagship store at Herald Square in New York City, one of the most visited tourist destinations in the world.

Macy’s owns or controls about 300 of its stores, and some analysts have estimated that its real estate assets could be worth between $6 billion and $8 billion.

“Macy’s has some valuable real-estate including its Herald Square location, which makes Macy’s more attractive as a target. Although the company has monetized some of its real estate, there is likely more that can be done,” Citi analyst Paul Lejuez said in a note to clients on Monday.

Arkhouse and Brigade are both known for their expertise in real estate and distressed debt investments. Arkhouse, founded by former executives of Vornado Realty Trust, has been involved in several high-profile real estate deals, such as the acquisition of the St. Regis Hotel in New York and the Willis Tower in Chicago.

Brigade, founded by former employees of MacKay Shields, manages about $30 billion in assets, and has a history of investing in troubled companies, such as J.C. Penney, Neiman Marcus and Hertz.

The consortium has reportedly secured financing for the deal from Bank of America, Wells Fargo and Deutsche Bank.

However, the deal is not a done deal yet, as Macy’s board, led by former Home Depot CEO Frank Blake, has to review the offer and decide whether to accept it, reject it or negotiate for a higher price.

The board also has to consider the potential disruption that a buyout process could cause to the company’s operations, especially during the crucial holiday season, when Macy’s generates a large portion of its sales and profits.

Macy’s is expected to report its fourth-quarter and full-year results in mid to late February. The company has forecasted that its sales will decline by low- to mid-20s percentage in the fourth quarter, and that its adjusted earnings per share will be positive but lower than last year.

Macy’s is also undergoing a leadership transition, as its long-time CEO Jeff Gennette is set to retire in Feb. 2024, and will be succeeded by Tony Spring, the current president and chief operating officer.

The deal, if completed, would mark the end of an era for Macy’s, which was founded in 1858 and became a symbol of American retailing and culture. Macy’s is known for its annual Thanksgiving Day Parade, its Fourth of July fireworks show, and its role in popular movies such as Miracle on 34th Street and Elf.

The deal would also have implications for the broader retail industry, as Macy’s is one of the largest tenants of mall operators, and its exit could trigger more store closures and vacancies in an already challenged sector.

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