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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: Joining us now and thrilled to say is one of

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Speaker 2: the minds behind the offer. Sitting next to me is

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Speaker 2: gabriel Kahana Arkhouse, CEO, managing partner and co founder.

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Speaker 1: Gabrielle. Great to have you in person.

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Speaker 2: Let's talk about this raised offer, the bid going from

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Speaker 2: twenty one dollars a share to twenty four dollars a share.

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Speaker 2: Are you prepared to raise it again if Macy's rejects us.

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Speaker 3: We certainly hope they don't reject it, and you know,

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Speaker 3: they said that they will carefully review this offer in

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Speaker 3: that statement you just read. We sincerely hope that they

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Speaker 3: really do carefully review it in good faith as they

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Speaker 3: should have almost you know, I guess more than three

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Speaker 3: months ago at this point our initial offer. And we

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Speaker 3: also think that Macy's shareholders, you know, in that statement,

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Speaker 3: the you know, Macy's executives are telling shaholders they don't

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Speaker 3: need to do anything right now. Our view is that

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Speaker 3: Macy's shareholders own this company and they should do something,

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Speaker 3: which is reach out to their directors, reach out to

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Speaker 3: their executives, and urge them to engage. Sincerely and in

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Speaker 3: good faith with our credible buyer group.

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Speaker 2: And I want to bring you a line from the

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Speaker 2: press release that you put out in relation to this offer.

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Speaker 1: I thought this line was interesting.

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Speaker 2: We may remain frustrated by the delay tactics adopted by

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Speaker 2: Macy's bord of directors and it's continued refusal to engage

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Speaker 2: with our credible buyer group. Have communications changed or open

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Speaker 2: up since this latest raised offer.

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Speaker 3: It's hard to say. There's certainly been dialogue, and dialogue continues,

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Speaker 3: but what we're asking for is that dialogue progress from

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Speaker 3: communications and dialogue to action and to a substant a

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Speaker 3: substantive conversation and engagement wherein we can contract and give

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Speaker 3: shareholders a really significant premium in cash.

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Speaker 1: Today and you're.

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Speaker 2: Probably aware, but there's a train of thought out there

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Speaker 2: that our house and your partners in this bid are

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Speaker 2: chiefly invested in Macy's real estate portfolio. I know you've

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Speaker 2: said publicly that's not the case.

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Speaker 1: But what do you make.

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Speaker 2: Of Macy's plans to close one hundred and fifty stores.

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Speaker 3: I think it's a shame. We are not focused on

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Speaker 3: store closures, and in fact hope that we get to

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Speaker 3: close on the company before they close any stores. Our

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Speaker 3: view is that the real estate is incredibly valuable, in

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Speaker 3: large part because of its tenant, Macy's.

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Speaker 2: And I mean hypothetically, should they actually go ahead and

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Speaker 2: offload those one hundred and fifty stores, close those one

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Speaker 2: hundred and fifty stores before you close on any.

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Speaker 1: Bid, would that lessen the appeal of Macy's for you?

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Speaker 3: It's hard to say without the diligence that we're requesting.

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Speaker 3: We're sort of taking an outside view in so I

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Speaker 3: can't speak to that.

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Speaker 2: And let's say hypothetically that you do acquire Macy's before

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Speaker 2: they were to shut those stores in your plans that

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Speaker 2: you've been thinking about for Macy's, as it's possible that

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Speaker 2: you could actually close more than one hundred and fifty stores,

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Speaker 2: or what would you actually do with the real.

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Speaker 3: Estate, that would be very surprising us. It's really much

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Speaker 3: more of a capital markets rejiggering and a capitalizing on

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Speaker 3: the awesome asset base that they have, as opposed to

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Speaker 3: let's close stores and redevelop them into something else. Certainly,

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Speaker 3: I'm sure it's the case that there is redevelopment opportunities

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Speaker 3: in this portfolio, probably largely not through demolition and redevelopment,

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Speaker 3: but you know, in out parcels and malls and other

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Speaker 3: interesting development opportunities that I'm sure will be availed to

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Speaker 3: us when we get that diligence, But right now we're

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Speaker 3: not onto writing that at all. Our base case assumption

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Speaker 3: is that all Macy's malls stay open, all Macy's locations

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Speaker 3: stay open, and that we enhance the credit worthiness of

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Speaker 3: the tenant inside the store.

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Speaker 2: And I promise we're going to talk about something other

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Speaker 2: than real estate in just a couple of minutes.

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Speaker 1: But I do have another question because your big like

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Speaker 1: real estate. So that's all good, we all do so bid.

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Speaker 2: This bid values Macy's at eight point seven billion the

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Speaker 2: entire company, and there's an interesting analysis out from Bloomberg

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Speaker 2: Intelligence that estimates that the real estate alone is worth

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Speaker 2: upwards of eight billion dollars. So from that perspective, twenty

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Speaker 2: four dollars a share it could be seen still as

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Speaker 2: a low ball offer. Are you worried at other bidders

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Speaker 2: coming in here to this process?

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Speaker 3: I am. I'm really hopeful and pretty optimistic that we've

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Speaker 3: put together the right buyer group to be incredibly competitive

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Speaker 3: in any process that starts. And I have a high

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Speaker 3: degree of confidence that will win a.

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Speaker 1: High degree of confidence.

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Speaker 2: There, let's talk about if you win, of course, you

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Speaker 2: would take Macy's private. What can you accomplish by taking

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Speaker 2: Macy's private versus keeping it as a public company?

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Speaker 1: A lot? A lot.

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Speaker 3: As a public company, it's hard to blame existing management

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Speaker 3: for focusing on the quarter because that's how they're judged,

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Speaker 3: judged day to day, their share price changes, their cost

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Speaker 3: of capital changes instantaneously. As a private company, you canocus

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Speaker 3: on long term prosperity, growth and a stabilization of this

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Speaker 3: business that's otherwise seemingly headed in a pretty scary direction.

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Speaker 2: And what info do you still need from Macy's when

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Speaker 2: it comes to your due diligence that you're doing on

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Speaker 2: this company, that you're doing in potentially raising another bid

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Speaker 2: if they do reject this one, What do you still

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Speaker 2: need from.

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Speaker 3: Macy's Really confirmatory diligence. It's not complicated, but it's a

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Speaker 3: lot of work.

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Speaker 2: And you've also, of course, as part of this, nominated

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Speaker 2: nine people to Macy's board.

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Speaker 1: How confident are.

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Speaker 2: You that you actually have the votes there to do that?

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Speaker 3: So you know, the nine director nomination is really a

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Speaker 3: function of the board size, they are fourteen directors. So

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Speaker 3: to ensure that we are speaking to shareholders directly, and

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Speaker 3: really to ensure that shareholders can exercise their desires, their

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Speaker 3: wants c two ineffectuated change, we need to nominate nine.

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Speaker 2: So yeah, And how is the communication with shareholders happening?

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Speaker 2: Is that you reaching out proactively to shareholders? Are you

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Speaker 2: seeing inbound requests? What's the mix there?

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Speaker 3: I would say it's a combination. We've not formally submitted

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Speaker 3: to any proxy materials and we're not soliciting votes at

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Speaker 3: this time, but we have received inbounds from shareholders, you know,

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Speaker 3: on no solicited basis, and are very happy to speak

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Speaker 3: with anyone. We are a significant shareholder in this company

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Speaker 3: and have very strong views about it.

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Speaker 2: And let's talk a little bit more about financing here,

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Speaker 2: because that has been one of the questions.

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Speaker 1: Of course, how would you pay for this?

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Speaker 2: And you have also said that you've identified large global

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Speaker 2: institutional financing sources that represent one hundred percent of the

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Speaker 2: capital required to buy the shares in Macy's that we

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Speaker 2: do not already own. Can you give us some detail

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Speaker 2: about who those large global institutional financing sources could be.

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Speaker 3: Yeah, So, they are, like you said, large global money

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Speaker 3: center banks, and the company shouldn't be surprised that there's

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Speaker 3: so much interest in participating in this capitalization. They have

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Speaker 3: a really great asset base and hearing some of their

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Speaker 3: responses that it's a tough capital markets environment, it's a

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Speaker 3: tough financing environment, all of that's true, and notwithstanding that,

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Speaker 3: there is robust interest in participating in this privatization.

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Speaker 2: All right, Gabriel, it's going to be really interesting to

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Speaker 2: watch this one play out. Hope to continue this conversation soon. That,

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Speaker 2: of course, is Gabriel Kahana, the CEO of ARC House