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Jones, Istithmar Reach New Barneys Deal

Istithmar appears to have a firm lead in the bidding war for Barneys New York after submitting a new $942.3 million cash offer for the specialty retailer.

Istithmar appears to have a firm lead in the bidding war for Barneys New York after submitting a new $942.3 million cash offer for the specialty retailer. And Barneys’ new owner should be determined by week’s end.

Istithmar and Barneys parent Jones Apparel Group inked a new agreement for the Dubai-based fund to buy Barneys, which included a higher termination fee of $34.7 million if Jones accepts another offer. Istithmar is in a bidding race with Fast Retailing Co. Ltd. of Japan, which on Sunday submitted a $950 million cash offer for Barneys.

On Wednesday, Jones said Fast has one more chance to make a bid for Barneys, which has to be submitted by 5 p.m. today.

To match Istithmar’s offer, Fast would need to submit a new proposal of at least $977 million, which would cover the $942.3 million offer on the table from Istithmar and the new, higher, $34.7 million termination fee. But that might not get Fast too far in the bidding war.

According to information from Jones, the New York-based apparel firm can end the agreement with Istithmar only if the Jones board determines that an offer from Fast is a “superior transaction” as defined in the Istithmar agreement. That agreement, should Fast elect to best the Istithmar offer, also gives the Dubai fund the option of coming back with a “transaction at least as favorable to the Fast offer.”

A source close to Fast confirmed the Japanese firm is still interested in Barneys, but hasn’t yet determined what it should do. Either way, the future owner of Barneys should be determined by week’s end.

“Fast Retailing has the highest respect for the Barneys brand, management and creative teams, and we continue to believe Barneys would be a valuable addition to our portfolio of businesses. In light of the revised offer from Istithmar, and the substantially enhanced deal protections granted to Istithmar by Jones, we are evaluating whether it would be in the best interests of Fast Retailing’s shareholders to continue pursuing this transaction,” said a spokesman for the Japanese firm.

The current deal between Istithmar and Jones is $7.7 million lower than the $950 million offered by Fast, but the termination fee is also now higher, up from the $22.7 million that Jones and Istithmar agreed on in June.

Istithmar and Jones signed their first agreement for the purchase of Barneys for $825 million on June 22. The agreement gave Jones the opportunity to entertain unsolicited third-party offers by a certain date, a timeline Fast met when it fired its first salvo topping the Istithmar bid with an unsolicited, nonbinding $900 million cash offer on July 5. Fast submitted a definitive proposal to buy Barneys for $900 million cash on July 31, which was accepted by Jones.

Istithmar matched Fast’s $900 million offer, only to be topped by a $950 million cash offer by Fast on Aug. 5. There are no other bidders for Barneys, and Jones chief executive officer Wes Card said on the company’s second-quarter earnings conference call to Wall Street analysts on Aug. 1 that there are also no bidders for all of Jones.