Amazon has been signaling that it wants a piece of the Saks empire — including possibly buying it outright — even as its prospects to break into the luxury market have been complicated by its controversial role in the retailer’s bankruptcy, The Post has learned.
About three months before the owner of Saks and Neiman Marcus filed for Chapter 11 in January, Amazon tapped the investment bank Lazard to explore acquiring Saks Global or to take a bigger stake in the debt-ridden chain, according to sources with knowledge of the negotiations.
“They spent a lot of time, money and energy working on the deal and there was a strong belief that Amazon would purchase the company — right up until Christmas,” a source told The Post.
Amazon — which replaced Lazard with Evercore during several weeks of rough-and-tumble talks — eventually decided against an acquisition, in part over concerns about the company’s brick-and-mortar stores, this source said.
“They weren’t sure they could run them,” the source said of Amazon, although the web giant believed it “could deal with Saks Global’s debt.”
Shortly after the discussions ended, Saks Global began preparations for bankruptcy.
After the Chapter 11 filing, however, Caroline Casey Boman, the Seattle-based e-tailing giant’s director of mergers and acquisitions, took a seat on the unsecured creditors committee for Saks, according to court papers. Amazon’s unusual assignment of an investment banker to such a role — which typically goes to a company’s lawyer — has raised eyebrows, according to insiders.
“By putting an M&A person on the committee you are signaling what your interest is in the matter,” said one attorney involved in the case who asked not to be identified. “I would not be shocked if Amazon was interested in participating in a sales process. It could step in and make an enormous bid.”
Thus far, the relationship has been rocky. At a “tough meeting” in early February, Saks’ new CEO Geoffroy van Raemdonck told Amazon’s vice president of M&A, Carlo Bertucci, that Amazon was “bad for luxury” and “difficult to deal with,” according to a source briefed on the meeting who paraphrased van Raemdonck’s comments.
In exchange for reinstating the companies’ “Saks on Amazon” web retailing partnership, Bertucci had reportedly offered to soften Amazon’s stance in bankruptcy court, which had included a headline-grabbing demand for a sale of the iconic Fifth Avenue flagship store to pay off a $475 million debt to Amazon, according to a source.
In response, van Raemdonck shot back that Amazon had “no leverage” after a federal bankruptcy judge in Houston approved $1.75 billion in debtor-in-possession financing to keep operations afloat — and “basically dumped Amazon,” according to the source.
An Amazon spokesperson declined to comment on any strategic merger talks initiated with the help of Lazard and Evercore.
A Saks spokesperson also declined to comment specifically on any strategic merger talks with Amazon. The spokesperson added, however, that the “Saks on Amazon” storefront “saw limited brand participation” and that it believes “driving traffic to Saks.com will better serve our customers and brands.”
“Our decision to no longer operate the Saks on Amazon storefront follows a thorough review and reflects our goal of prioritizing the areas of our business that present the greatest opportunity for sustainable, long-term profitable growth,” the spokesperson said.
Saks on Amazon launched last April with brands like Dolce & Gabbana, Balmain and Stella McCartney. The deal included a minimum guarantee of $900 million in fees paid by Saks to Amazon over eight years, according to court documents. But it had only produced about $15 million, sources with knowledge told The Post.
Saks Global asked Bertucci to slash the fees, either by restructuring the deal or deferring the payments, but Bertucci refused as merger negotiations heated up, multiple sources said. Shortly after the bankruptcy, Saks pulled the plug on the venture, insiders said.
It was the latest luxury setback for Amazon, which has long found high fashion to be an awkward fit. While the colossus founded by Jeff Bezos craves expansion into a niche that could help elevate its brand and its razor-thin margins, luxury insiders have recoiled at the company’s cluttered website, which they say looks optimized for batteries, socks and kitchen utensils as opposed to suits, evening dresses and designer handbags.
“Luxury companies have been resistant to Amazon historically because it has requirements on how many units it needs a seller to move on its platform and it didn’t demonstrate that it could house luxury in the proper way,” one well-connected fashion executive told The Post.
On the flipside, Amazon has remains enthusiastic about the “Saks on Amazon” partnership the companies struck last April because “Saks acted as the intermediary and took out the friction of working with Amazon,” the executive added.
In early January, after demanding the “immediate liquidation” of the Saks Fifth Avenue flagship in Manhattan, Amazon tempered its rhetoric as Boman joined the unsecured creditors committee, which also includes top lawyers from Chanel, LVMH and Kering, the Paris-based owner of Gucci, according to court filings.
That was after Amazon’s initial bid to block Saks Global’s $1.7 billion debtor in possession funding was rebuffed by the bankruptcy judge who ruled that that the funding was “fair and reasonable.”
“Amazon saw the handwriting on the wall,” and pivoted, said bankruptcy attorney Leslie Berkoff of Moritt Hock & Hamroff, who is representing vendors in the bankruptcy.
“Amazon made a strategic decision after its initial objection to the proposed DIP financing was filed,” said bankruptcy attorney David Wander of Tarter Krinksky & Drogin, who is not involved in the bankruptcy.
“Instead of knocking down the front door, they went to the back door to reach the luxury brands,” Wander said. “They get to see all the Saks Global financials and sit at the table with all the people they are trying to seduce.”
In the coming weeks, Saks Global is scheduled to submit a business plan that will show the bets fashion brands are willing to make on Saks ahead of the crucial fall and holiday seasons. Insiders will also be looking for clues about Amazon’s intentions.
“At the end of the day, if they want this,” said bankruptcy attorney Joseph Sarachek, “they could easily own Saks Global.”
