(Bloomberg) -- The owner of Saks Fifth Avenue is acquiring Neiman Marcus Group for $2.65 billion — a deal that will unite America’s two largest high-end department-store chains in a bid to grab a bigger share of a slowing industry.

Amazon.com Inc. and Salesforce Inc. will help facilitate the deal by Saks owner Hudson’s Bay Co. The tech companies will take minority stakes in a new company, called Saks Global, according to a statement Thursday. HBC will also finance the deal with $2 billion raised from investors. And affiliates of Apollo Global Management are providing $1.15 billion in debt financing. 

Representatives for Salesforce and Amazon declined to comment on an earlier report about the deal. The statement didn’t disclose the size of their investments.

The combined operations would include 39 Saks Fifth Avenue stores and 36 locations under the nameplate of its Dallas-based competitor, as well as two Bergdorf Goodman stores in Manhattan. Both chains also have outlet stores. The goal of the deal is to cut costs and boost profitability by giving the new company bargaining power with vendors and reducing supply-chain and other shared costs.

Marc Metrick, chief executive officer of Saks Fifth Avenue’s online operations, will run Saks Global. “How do you future-proof a brand like Saks or Neimans or Bergdorf? You do that through technology,” Metrick said in an interview.

The deal is the culmination of on-again, off-again talks between the two privately-held competitors during the past decade and a half. Momentum began to build when Neiman declared bankruptcy in 2020, shedding debt and making it a more attractive target, and accelerated as luxury sales have weakened in the past year or so.

Neiman’s bankruptcy also brought in new owners — Pacific Investment Management Co., Davidson Kempner Capital Management and Sixth Street Partners — that typically seek a relatively quick return on their investments, rather than spend years in the minutiae of a retail turnaround.

Tech Stakes

The involvement of Amazon “adds a bit of spice to an otherwise predictable deal,” GlobalData analyst Neil Saunders wrote in a research note. Its stake makes sense, he said, “as it has ambitions to play more heavily in the luxury space and this would give it a toehold.”

This is among Amazon’s first investments in a physical retailer since it bought Whole Foods Market in 2017 to help the online retailer push into the grocery business. The e-commerce giant has tested the waters in other industries, too, taking stakes in cargo carriers behind its Prime Air delivery business, for example. 

Salesforce has touted luxury-brand partners such as Louis Vuitton and McLaren but doesn’t usually take direct stakes in the companies. Its venture investments page lists dozens of stakes in software startups, not retailers.

Real Estate 

US department stores are in flux. Nordstrom Inc.’s founding family has said it’s considering taking the retailer private. The new CEO at Macy’s Inc. is rolling out his turnaround plan, which includes shutting almost a third of the company’s namesake stores — part of efforts to address demands from activist investors.

A decline in share prices across department stores has been driving the recent uptick in deal activity, Fitch Ratings analyst David Silverman said. Department stores also have coveted real estate, which is part of what motivated HBC to go after Neiman Marcus. The company owns its namesake Canadian department-store chain, and CEO Richard Baker is also a real estate investor.

The combined companies will have a US real estate portfolio worth $7 billion, according to the statement. Recent luxury deals have been a bright spot for New York commercial real estate, which has been in the doldrums since the pandemic. 

Geographically, there isn’t a lot of overlap in the brick-and-mortar networks of Saks and Neiman Marcus. Saks has more stores on the East Coast, while Neiman has a bigger footprint in the southern and western US.

Both Saks Fifth Avenue and Neiman Marcus saw a jump in sales from the end of 2020 through 2022 as consumers spent their extra pandemic savings on expensive handbags and other luxury items. But those gains faded as inflation surged, and quarterly sales at both companies have been falling year-over-year.

Competition has also been rising, including from the very partners Saks and Neiman have worked with for decades. Luxury brands, such as those owned by conglomerates LVMH, Kering SA and Richemont, have been focusing on selling more of their own products on their own websites and opening stores in recent years, too, pivoting away from department stores.

Executives at luxury brands have said they prefer to have more control over how their merchandise is displayed and how customers are treated in their stores, as well as where their stores are located — efforts that are helping to drive traffic to their shops. That’s been a further blow to department stores.

“The department-store model has been failing because the whole business was designed for a completely different retail environment than what we have now,” Morningstar analyst David Swartz said. “Every part of department stores has been challenged by competition.”

Those challenges already felled one-time peers such as Barneys and Lord & Taylor. Macy’s-owned competitor Bloomingdale’s, though, is faring better and comparable sales rose slightly in the most recent quarter.

Analysts expect the Saks-Neiman deal to attract antitrust scrutiny from regulators. Under Federal Trade Commission Chair Lina Khan, who was appointed by President Joe Biden, the agency has brought the highest number of merger challenges since 1976, when the US began requiring antitrust reviews before a deal closes. In April, the FTC sued to stop the owner of the Coach brand from acquiring the parent of Michael Kors, the first time the agency has tried to stop a deal in the fashion-accessories sector.

“I have to respect the process that the FTC is going to go through,” Metrick said in the interview. Saks Global plans to improve the brands’ websites, including making it easier to search for merchandise and make offerings more personalized to each shopper, while also investing in stores. 

“As a consumer,” Metrick said, “you’re going to win.”

--With assistance from Spencer Soper and Brody Ford.

(Updates throughout with companies confirming the acquisition, providing details.)

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