A team of Ares Management LLC and the Canada Pension Plan Investment Board are in the final stages of negotiations to buy Neiman Marcus Inc. for more than $6 billion, said people familiar with the matter, in a move that would shift the luxury retailer from one set of private-equity ownership to another.
The two sides were racing to finalize and announce a completed deal, the people said. The discussions remained underway Sunday afternoon and could still fall apart, some of the people said.
A sale of Neiman to the private-equity firms for more than $6 billion would be considered a successful outcome for its owners. Neiman, purchased by private-equity firms TPG and Warburg Pincus LLC for $4.9 billion in 2005, has been looking for an outright buyer for the retail chain while simultaneously laying the groundwork for an initial public offering of stock. The retailer's owners also include private-equity firm Leonard Green & Partners LP.
In recent weeks Neiman held discussions with the team of Ares and the CPP Investment Board, as well as KKR[4] & Co. and CVC Capital Partners Ltd. about a possible sale, people familiar with the matter have said. Ares is currently an owner of 99
Buyout firms usually prefer selling companies they own instead of taking them public so they can realize investment returns immediately. Selling restrictions and stock-market fluctuations associated with IPOs can make cashing out at an attractive price a longer, more difficult process for private-equity firms. The result is that buyout firms often solicit outright buyers even as they make IPO preparations.
Potential buyers have been concerned about Neiman's growth prospects. The company reported $4.5 billion in sales for the 12-month period ended in April, slightly below Neiman's precrisis revenue level of $4.6 billion in 2008. Even so, some outside observers have said a price around $6 billion would be fair for Neiman, and value it at a multiple to certain earnings measures comparable with what rival Saks[5] Inc. commanded in a recently announced sale to Hudson's Bay[6] Co.
Hudson's Bay in July agreed to pay $2.4 billion, or $16 a share, to acquire Saks in an all-cash deal. As of the end of its most recent quarter, Saks operated 42 Saks Fifth Avenue stores and 66 outlet stores. Deborah Weinswig, a Citigroup Inc. analyst, recently valued the fleet of stores at $1.5 billion, including $805 million for the flagship New York location.
While the deal for Saks and a potential sale of Neiman have some factors in common—including the benign financial-market conditions that helped support them—there are different circumstances at play in each situation, too. In the case of Neiman, TPG and Warburg have owned it for eight years, a hefty holding period for private equity, and are eager to cash out of the investment. The Saks deal was driven largely by the real-estate value underpinning the company, with some gains also expected to be reaped from putting it together with fellow retailer Hudson's Bay.
Neiman is a century-old, luxury department-store chain based in Dallas.
Besides its Neiman Marcus department stores, which are considered even more high-end than those of Saks, the company has outlet stores and owns high-end retailer Bergdorf Goodman as well as a home-furnishings catalog and an e-commerce site. Neiman operates a total of about 75 stores, including 41 Neiman Marcus locations in the U.S., according to the company's website. Neiman Marcus stores are in Beverly Hills, Calif., Bal Harbour, Fla., and Short Hills, N.J., among other locations; Bergdorf Goodman is in Manhattan.
The stores sell high-end brands, including $400 Jimmy Choo pumps, $2,000 Prada leather bags and $750 Burberry trench coats.
In recent years, Neiman Chief Executive Karen Katz has pushed the retailer to broaden its assortment of goods to attract younger and less-wealthy shoppers.
—Ryan Dezember and Emily Glazer contributed to this article.
References
- ^ MIKE SPECTOR (topics.wsj.com)
- ^ DANA CIMILLUCA (topics.wsj.com)
- ^ CONNECT (online.wsj.com)
- ^ KKR (online.wsj.com)
- ^ Saks (online.wsj.com)
- ^ Hudson's Bay (online.wsj.com)
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