Does Ares’ Neiman Marcus exit have a conflict of interest?
This week, reports emerged that Neiman Marcus could be bought by competitor Hudson’s Bay Company. Ares (via ACOF III and IV) and a partner purchased the luxury retailer in 2013. Neiman Marcus has since struggled with languishing sales and a high debt load.
Left unreported is a potential conflict which could cloud any deal between Neiman and Hudson’s Bay. Lee Neibart joined Ares Real Estate Group in 2013, and is still identified as a Partner of Ares Real Estate Group on the firm’s website (as of March 17). He has simultaneously served as a director of Hudson’s Bay Company since 2006, and as CEO of a Hudson’s Bay joint venture. He sits on Hudson’s Bay’s board as a representative of the firm’s largest shareholder.
Further, an affiliate of the Abu Dhabi Investment Council is Hudson’s Bay’s second largest shareholder. The Abu Dhabi Investment Authority owned a 42.8% interest in Ares Management, LP as of year-end 2016.
The Wall Street Journal reported that “Hudson’s Bay is seeking a complex and unusual deal that would give it control of Neiman Marcus without assuming the company’s debt.”
Ares limited partners in ACOF III and IV should ask:
- What role, if any, has Mr. Neibart played in negotiations between Neiman and Hudson’s?
- Does Mr. Neibart’s role give Hudson’s a competitive advantage in bidding for Neiman? If so, who benefits?
- What will happen to limited partners’ equity investment in the retailer if Hudson’s get “control of Neiman Marcus without assuming the company’s debt”?