Rate relief

Investors hope for rate cuts as soon as early 2024

Happy Monday. Here’s what we’ve got today…

  • A single headline deal and an interest rate reversal that could be within touching distance

  • The deal sheet, plus a look at how Greylock is approaching AI investments

1. Macy’s real estate makes an attractive target.

• An investor group led by Arkhouse Management and Brigade Capital Management has approached Macy’s with a $5.8 billion takeover offer.

• The group is likely not interested in a struggling department store business, instead settings its sights on Macy’s real estate holdings. Analysts say the company’s store footprint could be worth between $6 - $8 billion, including its flagship Herald Square location.

• There's also speculation that a deal could include the spin-off of Macy's higher-end brands Bloomingdale's and Bluemercury. Bloomingdale's has had revenue softness, though its upscale offering has proven more resilient than the lower-tier Macy's unit. Bluemercury, the company's cosmetics business, has managed topline growth.

• Even if Macy’s opts to proceed, financing could still prove a sticking point. The potential acquirers presented a letter of support from an investment bank, but have no firm commitments. Prior approaches for Kohl’s and Nordstrom fell apart in recent years after lenders showed little appetite.


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Buyout investors may be inching closer to a reprieve from today's high-rate environment. It’s certainly not here yet, but there’s a growing consensus that rate cuts may be just around the corner.

Rate cut speculation took off following the Federal Reserve’s November 1st meeting, in which it opted to hold rates steady for the second time in a row. The bigger news, however, was what many interpreted as Chair Jerome Powell’s signal that he may have finished what has been the most aggressive monetary tightening in recent memory.

Through the remainder of the month, a steady stream of positive inflation readouts seemed to support the possibility of early 2024 rate cuts.

A similar story unfolded across the Atlantic: Isabel Schnabel, a known inflation hawk on the board of the European Central Bank, said inflation is showing a “remarkable” slowdown, and that another hike in borrowing costs is “rather unlikely.” What really got investors excited was what she didn’t say—Schnabel refrained from ruling out a rate cut within the next six months when asked.

Bond Market U-Turn

While that was happening, U.S. bonds posted their best monthly performance in nearly four decades—the average yield for both investment-grade and junk issuers is now at its lowest level since July.

In response, corporate borrowers have rushed to take advantage of the cheapest financing available in months. In November, U.S. and European borrowers issued $246 billion worth of bonds, or 57 percent more than October's total. That’s despite what is ordinarily a slow month-end through the Thanksgiving holiday.

In early December, Powell did make a point to push back on the rate-cut chatter, saying it was “premature” to speculate about when the Fed will start to ease, and signaling he’s in no rush to declare victory over inflation.

But, choosing to ignore his attempt at expectation tempering, by the end of December’s first week, markets were betting on a 70 percent chance the Fed would kick off rate cuts in March and priced in a full percentage point of cuts by November 2024.

An unexpectedly strong jobs report released on Friday cooled the party somewhat, with odds of a March cut now at around 50 percent. Though, whether it comes in March or May, investors increasingly feel they now have visibility into a near-term reversal.

What’s Next?

This week, the Fed, the ECB, and the Bank of England all hold their final policy meetings of the year, preceded by Tuesday’s release of November inflation figures. No decisions are expected until early 2024, but this week could provide further assurance to those hoping for cuts as soon as possible.

This time next year, investors may have a bit more cash left over after debt service, providing some much-needed cushion for their most stretched portfolio companies.

They may also find the math becomes easier on new deals, which should help to extend a recent acceleration in sponsor-backed deal volume. The number of Q3 transactions was up more than 60 percent vs. Q1’s trough, though remains well off of post-pandemic highs.

That’s all assuming, however, that we’re in for a relatively soft landing. A dramatic economic slowdown would present a set of problems far worse than elevated rates.


Occidental Petroleum agreed to acquire CrownRock, a privately held Permian Basin producer, in a deal valued at around $12 billion.

Endeavor Energy Partners, a Texas-based oil and gas producer, is exploring a sale that could value the business at around $30 billion.

Cigna has abandoned its merger talks with rival health insurer Humana, opting to instead commit an additional $10 billion to its share repurchase program.

RedBird Capital Partners, partnering with Skydance Media CEO David Ellison, is in discussions over a deal to acquire Paramount Global (Nasdaq: PARA) from Shari Redstone.

GlacierPoint, a Mill Point Capital portfolio company, acquired Cool River Beverages, a Bronx-based beverage distribution business.

Hildred Capital Management is acquiring Hello Bello, a provider of discount baby products, through its Chapter 11 process.

Molior Growth Partners, a new Denver-based firm, made its debut with the acquisition of Western Storage & Handling, a Denver-based provider of material handling and storage solutions.

Morrow Sodali, backed by TPG Growth, acquired Domestique, an Australian firm focused on corporate communications and reputation management.

Partners Group agreed to acquire Velvet CARE, a manufacturer of hygiene paper products, from Abris Capital Partners.

Permira agreed to acquire GGW Group, a European insurance brokerage platform for small and medium-sized enterprises, from Hg.

TPG's Rise Fund is in talks to acquire Outcomes First Group, a Stirling Square-owned special education provider.

Investcorp agreed to acquire a 50 percent stake in Corsair Capital’s infrastructure business for $1.1 billion.

INEOS Oxide agreed to acquire LyondellBasell’s Texas-based ethylene oxide unit for $700 million.


Marex Group, a U.K.-based commodities-focused financial services platform, announced plans to proceed with a New York IPO over London, targeting a value of more than $1.8 billion.

Sotheby's, a luxury auction house, shelved previously reported plans to go public, per Bloomberg.

Chemist Warehouse, an Australian pharmacy chain, went public via an A$8.8 billion reverse merger with Sigma Healthcare.


DAZN, a U.K.-based live and on-demand sports streaming service, is considering options for a $1 billion funding round.

SumUp, a London-based payments company, raised €285 million in new funding. Sixth Street Growth led, with participation from Bain Capital Tech Opportunities, Liquidity Group, and Fin Capital.

Pragmatic Semiconductor, a developer of flexible integrated circuits, raised £182 million ($206 million) in Series D funding. UK Infrastructure Bank and M&G Catalyst co-led, with participation from Northern Gritstone, Latitude, and existing backers British Patient Capital, Cambridge Innovation Capital, and Prosperity7 Ventures.

Rokid, a developer of AI and AR glasses, raised $112 million at a $1 billion valuation from NetDragon Websoft.

Carro, a Singapore-based online vehicle marketplace, is in discussions over a potential $100 million crossover round.

Actility, a LoRaWAN network provider and IoT enterprise services company, raised €16 million ($17.3 million) led by Bpifrance.


Wynnchurch Capital is targeting $3 billion for its sixth buyout fund.

AnaCap raised a €300 million continuation fund for insurance brokerage platform MRHT and tax software provider GTT.


1. A thesis for vertical AI.

• Greylock shares its thoughts on AI-enabled vertical SaaS. — Why a Vertical Approach is Key to Building Enduring AI Applications, Greylock

2. Launched by TPG, Xponential is accused of defrauding its franchisees.

• CEO Anthony Geisler felt TPG was stifling his growth-at-all-costs approach, so he partnered with Snapdragon Capital Partners to buy out the business. Now, he’s facing lawsuits from fitness club owners who say he misled them. — How the Biggest Boutique Fitness Company Turned Suburban Moms Into Bankrupt Franchisees, Businessweek


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