Amazon’s Interest in Saks Complicated by Bankruptcy Issues
Amazon seems eager to acquire a stake in the Saks empire, though the company’s controversial involvement in the retailer’s bankruptcy is making this ambition tricky, especially when it comes to entering the luxury market.
About three months prior to Saks and Neiman Marcus seeking Chapter 11 protection in January, Amazon reached out to Lazard, an investment bank, to explore the possibility of buying Saks Global or increasing its stake in the financially troubled chain, as stated by a source familiar with the talks.
“They invested a lot of time and resources into this deal, believing until just before Christmas that Amazon would move forward with the purchase,” the source relayed.
After extended negotiations, Amazon eventually switched from Lazard to Evercore, ultimately deciding against the deal—partly due to worries about Saks’ physical retail operations.
“We were uncertain about managing Amazon,” the source mentioned, although they felt confident that the online giant could manage Saks Global’s debts effectively.
Immediately following the end of negotiations, Saks Global began preparations for bankruptcy.
Following the Chapter 11 filing, Amazon’s mergers and acquisitions director, Caroline Casey Bowman, took a seat on Saks’ unsecured creditors committee, according to court records. This unusual move—a banker joining this type of committee, typically composed of legal advisors—has raised eyebrows among insiders.
“Having M&A personnel on the committee indicates serious interest in the matter,” said a lawyer involved in the case, opting to remain anonymous. “It wouldn’t surprise me if Amazon is keen on being part of any sales process. Their bid could be significant.”
The relationship between the two has not been smooth. In a “tough meeting” early in February, new Saks CEO Geoffroy van Raemdonk told Amazon’s M&A VP, Carlo Bertucci, that Amazon might not be suited for the luxury sector and was “difficult to negotiate with,” according to individuals familiar with the discussion.
Bertucci suggested that Amazon might ease its posture in bankruptcy court if the partnership with Saks on Amazon was restored, highlighting a demand to sell the iconic Fifth Avenue flagship to settle a $475 million debt to Amazon.
However, Van Raemdonk countered that Amazon had “no leverage” and mentioned that they effectively disengaged from Amazon after a federal bankruptcy judge in Houston approved a $1.75 billion debtor loan to help keep Saks afloat.
Amazon did not provide comments regarding the merger discussions initiated with Lazard and Evercore.
A spokesperson for Saks chose not to comment on the strategic discussions with Amazon but mentioned that there has been “limited brand participation” in Saks on Amazon stores. They expressed a belief that driving traffic to Saks.com could better serve their customers and brands.
“The choice to stop operating Saks on Amazon stores resulted from a thorough assessment focused on prioritizing business areas with the highest potential for sustained, long-term growth,” noted the spokesperson.
Launched in April last year, Saks on Amazon featured brands like Dolce & Gabbana and Stella McCartney. The agreement stipulated a minimum fee of $900 million over eight years for Saks, though it generated only about $15 million, according to sources.
Saks Global requested Bertucci to amend the deal or defer payments, but he resisted as merger discussions intensified, leading to Saks withdrawing shortly after declaring bankruptcy, according to insider reports.
This has been yet another challenge for Amazon in the luxury sector, which has often viewed high fashion as an awkward fit. The company, established by Jeff Bezos, is looking to explore niche markets to boost its brand and thin profit margins, but luxury insiders are skeptical about Amazon’s cluttered platform, which they argue is more suited for ordinary consumer items.
“Historically, luxury companies have shied away from Amazon due to its seller requirements and the absence of a proven track record in handling high-end items appropriately,” one fashion executive disclosed.
Nevertheless, Amazon seems excited about the Saks on Amazon partnership because it provides a buffer against directly interacting with Amazon, as one executive explained.
By early January, Amazon’s tone had shifted after Bowman joined the creditors committee, reversing her previous call for immediate liquidation of the Saks flagship store.
This change followed a bankruptcy judge’s rejection of Amazon’s proposal to block Saks Global’s $1.7 billion debtor-in-possession financing, which was ruled as “fair and reasonable.”
“Amazon recognized the situation and adjusted its approach,” remarked Leslie Berkoff, a bankruptcy attorney representing vendors in such cases.
“Following the initial opposition to the proposed financing, Amazon opted for a different strategy,” added David Wonder, another bankruptcy attorney not connected to the case.
“They’re effectively accessing luxury brands in a less confrontational manner,” Wonder noted. “Now they have a clear view of Saks Global’s financials while sharing the table with those they’d like to attract.”
Saks Global is anticipated to present a business plan soon, detailing how fashion brands plan to invest in Saks as the fall and holiday shopping seasons approach. Observers will be on the lookout for indications of Amazon’s future intentions.
“In the end, they could easily take ownership of Saks Global if they chose to,” mentioned bankruptcy attorney Joseph Saracek.
