Nordstrom went public in the 1980s. The Nordstrom family, who are the largest combined group of stockholders, founded the company 125 years ago. According to WilmerHale partner Keith Trammell, the family tried to buy the department store retailer back in 2017 and 2018, but they were turned down by the board, so they tried again in late 2023. Trammell has worked with the family since 2017.
“It was really important to them to think critically about this, and so they approached Nordstrom’s board in 2017 and I was fortunate enough to be working with them at that point, and through a series of bids offered to take the company private at that point, at $50 a share,” Trammell told Law Week. “The board thought that that undervalued the company at the time, and that negotiation process played out very publicly and eventually ended with the board telling the Nordstrom family no and the group that they had formed to make that proposal was asked by the board to disband, which they did.”
Trammell explained that the latest development, the May 20 deal, which involved Erik Nordstrom, Pete Nordstrom, Jamie Nordstrom and other members of the Nordstrom family and El Puerto de Liverpool completing their all-cash acquisition of Nordstrom for $24.25 per share, was prompted in part by changes in the retail industry.
According to the deal announcement, shareholders of the company will also be paid a special paid cash dividend of $0.25 per share and prorated quarterly dividend, equivalent to $0.1462 per share.
Erik Nordstrom and Pete Nordstrom will lead the company as co-CEOs. Nordstrom common stock will cease trading prior to the opening of the New York Stock Exchange on May 21 and will be delisted from the NYSE as of that same date.
The WilmerHale team, representing the Nordstrom family, was led by Trammell with Dan Halston and Robert Kingsley Smith leading the litigation defense in two pending stockholder class actions. Chalyse Robinson and Glenn Pollner led the financing and capital markets components.
According to the announcement, El Puerto de Liverpool is a Mexican omnichannel retailer with a presence in department stores and an e-commerce platform. It operates across Mexico with 310 stores under the Liverpool and Suburbia banners, 119 specialized boutiques, as well as 29 shopping centers. For 176 years, it has offered the latest in fashion, interior design, food and beverages, housewares, technology and more.
Trammell explained that three members of the family had historically managed the company as co-CEOs. Blake Nordstrom, Pete Nordstrom and Erik Nordstrom started working at the shoe warehouse at Nordstrom as teenagers. They were the sons of Bruce Nordstrom, who was then a co-chairman — a family governance model the Nordstroms have used for generations. All three of them were co-CEOs until Blake Nordstrom contracted cancer and died in the early stages of chemotherapy. Pete Nordstrom and Eric Nordstrom’s cousin Jamie Nordstrom joined the two brothers as leaders in the family.
“Shortly after Blake’s passing, the board started to seriously re-evaluate the governance model, the co-CEO governance model,” Trammell explained. “They believed it was untraditional for a public company to have multiple CEOs, and they were really beginning to think critically about the extent to which the family should remain on the board and in control of the executive functions of the business.”
Trammell said there were a number of tense moments that played out, but that it was ultimately resolved and that the WilmerHale team worked with the family during that process.
After Nordstrom weathered the COVID-19 pandemic, in late 2023, the company started to consider a strategic alternatives review, which Trammell noted was a way for the independent board members to figure out the best way to return the highest value for stockholders. The company’s board concluded eventually that if there was sufficient interest by the family and external financing sources, the best outcome could be an all-cash sale of the business to take it private once again.
In late 2023 and early 2024, Trammell and the WilmerHale team worked with the family to explore different ways to fund the transaction. While they found plenty of interest from people in the industry, some of the deals ran into antitrust issues that couldn’t be resolved.
Trammell also noted another unusual thing for the legal team to navigate is that Nordstrom is a Washington state corporation, which he noted has an exacting anti-takeover statute that has never been litigated before. It was enacted to protect Washington corporations from hostile takeovers, not consensual ones like the Nordstrom merger, but the parties spent significant time focused on complying with it.
Another hurdle for the legal team was the deal being subject to exacting governance requirements and federal disclosure requirements because the deal was a controlling stockholder transaction.
“The combination of those requirements and the fact that it was a Washington corporation subject to [a] somewhat unusual state set of state laws, and the fact that [Nordstrom is] a high profile company, and the fact that it’s a consumer products and luxury retail company that everyone knows, we were 1,000% confident that we were going to face a significant litigation which we have and are continuing to face,” Trammell told Law Week. “So living under the scrutiny of that litigation we knew was coming was a very difficult set of circumstances to work with, and that’s even before we got to financing the transaction.”
The company’s senior notes are rated by Finch, Moody’s and S&P and if all three rating agencies downgraded the debt over the deal, all of the company’s senior notes would need to be repurchased or refinanced, jeopardizing the transaction.
“That’s $2.7 billion in debt, all of which was issued at investment grade or slightly above, meaning it was quite inexpensive, and very inexpensive relative to today’s interest rates,” Trammell added. “Structuring a deal that would not put new leverage on a company and trigger a downgrade was of paramount significance to us.”
El Puerto de Liverpool was an existing stockholder for Nordstrom, with slightly less than a 10% equity position. Despite increased tensions between the current U.S. government and Mexico, Trammell explained that the Nordstrom family and El Puerto de Liverpool were committed to their partnership with each other.
“The Nordstrom family is a very flat actor in terms of how it governs the company or how it controls the company, and it really wanted an equity partner who had the same vision for the company that they did and the same vision for the governance of the company that they did,” Trammell added.
Adding additional complexities to the deal was a Washington moratorium statute that could be triggered when any combination of stockholders holding 10% or more of the company’s stock formed a group.
“Because of the Washington moratorium statute issues, we couldn’t communicate across the family about the deal until we were given permission to do so by the board,” Trammell said. “Navigating those communications was very hard, particularly as things started to unfold and the deal started to build.”
Trammell explained the deal’s complexity in terms of layers. There was a merger agreement, which was almost 100 pages long and laced with complexities, as a majority of the family’s personal wealth was tied into the business. There were also a couple of separate financing transactions, including an equity recapitalization, a $1.2 billion asset backed loan and a unilateral extension of collateral to holders of approximately $2.7 billion in existing senior notes.
“A partner of mine told me I should retire after this, because you’re never going to see one this complicated again,” Trammell said.
“Frankly, a lot of the legal work was responding to market factors, political factors, industry factors — a lot of very complex things that we just had to keep rolling with the punches on,” Trammell added.
In addition to WilmerHale, 10 other law firms were involved in the transaction. The Nordstrom stores are located in 40 different states with around 50,000 employees.
“I think it was a transaction many years in the making,” Trammell told Law Week.