Macy's on Sunday said it has rejected $5.8 billion proposal from Arkhouse Management and Brigade Capital Management to take the department store operator private. The bid, priced at $21 per share, faced resistance from Macy's citing concerns over deal financing and valuation.

Arkhouse Management, known for its real estate-focused investments, and Brigade Capital Management, a global asset manager, had submitted the proposal with the intention of acquiring the shares of Macy's that they do not already own. While the investor group expressed openness to enhancing their offer pending due diligence, Macy's Board declined to engage, citing "a lack of compelling value" in the proposal.

"The Board has determined not to enter into a non-disclosure agreement or provide any due diligence information to Arkhouse and Brigade," Macy's stated. The rejection was also based on the investor group's failure to address concerns about their ability to finance the proposed transaction.

Despite investment bank Jefferies, serving as the financial adviser to the buyout group, providing a "highly confident letter" supporting the funds' ability to raise the necessary capital, Macy's expressed reservations about the uncommitted financing with multiple non-standard preconditions.

The bid from Arkhouse and Brigade has shed light on Macy's perceived undervaluation, especially in relation to its real estate assets. Analysts estimate the worth of Macy's real estate between $7.5 billion to $11.6 billion, bringing attention to the company's 316 owned stores out of its total 722.

This development follows Macy's recent announcement of job cuts and store closures, part of its efforts to streamline operations in a retail landscape dominated by younger, online competitors. The rejection of the bid raises questions about the future strategies and potential suitors for Macy's, as it grapples with the evolving dynamics of the retail industry.

(With Reuters inputs)