Amazon helps Saks owner acquire Neiman Marcus for $2.65 billion

Investing.com – The parent company of Saks Fifth Avenue has struck a $2.65 billion deal to acquire rival Neiman Marcus, the Wall Street Journal reported.

The merger, made possible by backing from e-commerce giant Amazon.com Inc (NASDAQ:), aims to create a dominant force in luxury retailing with a focus on retaining an affluent clientele.

The boards of both Saks Fifth Avenue and Neiman Marcus have approved the deal, with an official announcement expected soon. The two department store chains have been in talks for months and have considered merging on several occasions in the past. Both have faced challenges as consumer spending on luxury goods has declined and fashion brands have launched their own flagship stores.

The combined entity is expected to generate about $10 billion in annual sales. By comparison, luxury conglomerate LVMH Moët Hennessy Louis Vuitton, owner of Chanel, Louis Vuitton and numerous other brands, posted sales of about $94 billion last year.

Amazon plans to take a minority stake in the new company, to be called Saks Global, and will bring its technology and logistics expertise. Salesforce (NYSE:), another minor stakeholder, will help implement artificial intelligence. Saks already has business relationships with both tech companies, so the merger will strengthen existing partnerships.

HBC, the holding company that bought Saks in 2013, is financing the deal with $2 billion from existing investors, including Rhône Capital, Abu Dhabi Investment Council and NRDC Equity Partners. Affiliates of Apollo Global Management (NYSE:) are providing $1.15 billion in debt financing.

Marc Metrick, CEO of Saks’ e-commerce division, will lead the combined companies. The merger is a strategic move that’s based on the belief that the companies will be stronger together. Neiman Marcus, previously owned by several private equity firms, filed for bankruptcy protection in 2020. It emerged later that year with less debt and new owners, including Pacific Investment Management Co., Davidson Kempner Capital Management and Sixth Street Partners.

Luxury sales have been slowing recently, despite a spending boom sparked by surging demand from the Covid-19 pandemic. Inflation has also weighed on the market, especially among ambitious buyers with tighter budgets. Bain & Co. estimates that luxury spending in America will fall 8% in 2023 from 2022, even as sales rose in Asia and Europe.