Shares of Macy's (M) are higher Monday morning after the company announced it is considering a $5.8 billion buyout offer. This news come ahead of Macy's planned transition to a new CEO. David Swartz, Morningstar Senior Equity Analyst, tells Yahoo Finance that accepting this deal is worth considering given the risks for Macy's in rejecting it. With the current share price around $21 a share, over $2 billion in net debt, a history of uneven financial results, and an outdated business model, Swartz believes this is their chance "to get a better price for shareholders."

Despite recent struggles, Swartz notes Macy's still has strengths that make it attractive, including one of the largest online retail operations in the U.S., the upscale Bloomingdale's chain, and 40 million annual shoppers. Given these assets, the buyout offer allows Macy's to potentially unlock value for shareholders at a reasonable valuation amid a challenging retail climate.

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Video Transcript

BRAD SMITH: As we're tracking shares of Macy's pre-market right now, they are higher by about 15% on news that the company is weighing a $5.8 billion buyout offer. The proposal comes at an interesting time for the retailer smack dab in the middle of its critical holiday shopping season, and just weeks away from a planned CEO transition. So is the deal worth considering?

With more, we're now joined by David Schwartz who is the Morningstar senior equity analyst. David, let's start there. Is this deal worth considering for Macy's?

DAVID SWARTZ: Yes, I think it is worth considering. I think there's a lot of risk if Macy's turns it down flat because you never know when these kind of offers will come by. Now, $21 a share is kind of low. It potentially it is lower than the value of Macy's real estate. But you also have to remember that Macy's has $2.8 billion in net debt. It has a history of very uneven results over the past 15 years really, and the model at Macy's just doesn't work anymore. And so it really is important for Macy's to take this offer seriously and potentially try to get a better price for shareholders.

- David, do you think this type of offer because we're seeing shares at Nordstrom move higher on this, does this unleash a wave of activity for old-school iconic department stores like a Macy's, like a Nordstrom that own a lot of real estate, now we're going to see those buyers step up in here and putting in bids?

DAVID SWARTZ: Well. That's very possible. We did see Kohl's go through a potential buyout process a couple of years ago that did not end in a deal. And if you look at Kohl's stock price since, it's way below where it was at that time. It's far below the offers that were discussed.

You know, so I think that it's potential that someone else could go after Kohl's again because it is I think quite undervalued as well. Now, for Nordstrom, Nordstrom is a family-run business, and the Nordstrom family does own 30% of the company. So I think that's less likely to be sold, but it is possible that it could be taken private.

SEANA SMITH: Dave, when it comes to some of the uncertainty out there, you mentioned the fact that maybe this is more of a real estate play, just given the valuation and what we have seen. In terms of what are the other strengths though that could maybe make Macy's attractive to bidders, are there-- is there anything else that you have on your radar just in terms of Macy's, yes, it's struggling, but it still it still has an edge because of XYZ?

DAVID SWARTZ: Yeah. Macy's does have strengths. The company is one of the largest online retailers in the US with over $7 billion in online sales. The company gets very little credit for that because people still see it as a brick and mortar retailer. Other parts of the business that are attractive include Bloomingdale's. Bloomingdale's is a luxury store, does stand out from others. And it has been doing pretty well recently, which is part of the reason why the Bloomingdale's head is going to be the new CEO of Macy's very soon.

Then you also have Bluemercury, which does have potential and is growing. It potentially hasn't really been meeting what it could be but, you know, I think Bluemercury in the future does really meet with a lot of trends that have been powering other beauty retailers like Sephora and Ulta. You know, so I think-- I think Bluemercury is also interesting. Then you look at Macy's, Macy's does have 40 million shoppers' year, it has millions of credit card holders. It does have strengths that people would be interested in.