March 17, 2017
CC photo by Enrique Dans https://flic.kr/p/xg3Qa
CC photo by Enrique Dans https://flic.kr/p/xg3Qa

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”?

You can read our full report on Lee Neibart here.

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