J.C. Penney is facing a deadline that it may not be able to meet. The department store operator, which filed for bankruptcy in May, is at risk of running out of cash by July 15 if something dramatic doesn’t happen to change its financial position. All hope is not apparently lost, however, as reports have surfaced that Authentic Brands Group (ABG), Simon Property Group and Brookfield Property Partners are planning to make a bid for Penney.
The three firms, which previously worked together to acquire the Forever 21 and Aéropostale chains, have a track record of success in managing deals such as this. The news of the group’s interest in Penney follows other reports that had Amazon.com and Sycamore Partners separately kicking the tires on a possible deal for the chain. Authentic Brands and Simon have also been reported as considering a bid for Brooks Brothers’ business.
Acquiring Penney could provide benefits for all three of its prospective owners. ABG would be able to supply Penney’s stores and sites with merchandise from its impressive list of clothing brands, including Aéropostale, Barney’s New York, Forever 21, Frye, Nautica, Nine West and dozens of others. Simon and Brookfield would gain by being able to keep Penney anchors at malls that were already under pressure before the novel coronavirus forced them to close.
As part of its bankruptcy filing, Penney announced that it would close 242 of its 846 stores, spin off its real estate as a separate publicly-traded investment trust and push ahead with a turnaround plan put in place by CEO Jill Soltau that focuses on core categories such as women’s apparel along with improved customer service and low prices.
Penney would benefit from landlords willing to work with the company on rent payments while potentially gaining access to brands that appeal to demographics, particularly younger consumers, where the chain has struggled to find traction.
In an interview with CNBC last week, Jamie Salter, CEO of ABG, explained his thinking on deal making.
“My strategy is simple. Buy low, sell high,” he said, before adding, “We make sure, if we get into retail, that [the company] has a purpose. If it doesn’t have a purpose, we find a purpose.”
