NEW YORK — Saks Inc.’s decision day is near.

Financial sources said Thursday the bids are in and the Saks Inc. board could reach a decision as soon as this weekend on the winner. It also could seek a second round of offers. Saks officials declined comment.

Meanwhile, there has been a shakeout among the bidders, with the one-time front-runner Cerberus Capital Management deciding to drop out of the race. About a dozen other companies — both financial and strategic — are still said to be in it, though, ranging from Texas Pacific Group to Bain Capital, Jones Apparel to Bon-Ton. Blackstone and Jones are said to be interested only in SFA.

There have been some other surprises, the major one being that no company now appears to have put in a bid for all of Saks Inc., which would include both Saks Fifth Avenue and the northern department store group. One stumbling block may have been a too-high price tag for all of the retailer, financial sources said.

Shareholder sources still believe all of Saks Inc. will be sold off, albeit piecemeal.

for all of Saks Inc., which would include both Saks Fifth Avenue and the northern department store group. One stumbling block may have been a too-high price tag for all of the retailer, financial sources said.

Shareholder sources still believe all of Saks Inc. will be sold off, albeit piecemeal.

Saks’ announcement on Wednesday that the company had completed its internal investigation of improper markdowns and that it would repay vendors more than $48 million, along with the resignation this week of George Jones, president and chief executive officer of the department store group, convinced some shareholders that the entire company would be sold.

People knowledgeable about the situation said Bon-Ton remains in the running for at least the department store group, which consists of the Carson Pirie Scott, Bergner’s, Younker’s and Boston Store nameplates.

Saks’ smaller division, Club Libby Lu, is also on the auction block, and is said to be attracting the interest of Too Inc., Claire’s and Build-a-Bear. Saks in July sold its southern department store group — Proffitt’s and McRae’s — to Belk Inc. for more than $620 million.

This story first appeared in the August 26, 2005 issue of WWD.  Subscribe Today.

Cerberus dropped out because it deemed the price tag for Saks Inc. as too high, said a source in the investment community. Until this week, Cerberus and Bon-Ton were in talks over a joint bid for Saks Inc. in the $29-a-share range. Earlier this year, Bon-Ton was said to be discussing a possible joint bid with Bain Capital Partners just for the northern department store group, before deciding to team with Cerberus for a possible bid for all of Saks.

A real estate source specializing in commercial retail sites said Bon-Ton still needs a private equity partner to finance a bid for the department store group. It could not immediately be determined whether the retailer has either reestablished talks with Bain or is planning a joint bid with another financial player.

A lofty per-share price tag for Saks could have been achieved through a combination of high real estate valuation and improved operations at SFA. However, a financial source with knowledge of Saks’ operations said Thursday that one of the problems in valuing the SFA operation is that the business is not as good as it appears. The source, who requested anonymity, noted that the SFA turnaround still needs much work.

SFA’s same-store sales have been mixed over the past three months. In May, June and July, comps showed gains of 0.8, 7 and 4.1 percent, respectively.

Another private equity group said to be still in the bidding is Texas Pacific Group, but is now just eyeing SFA. TPG partnered with Warburg Pincus to buy the Neiman Marcus Group, which is expected to close later this year. TPG is considered a true leveraged buyout shop, with particular expertise in turnaround situations.

Even though TPG soon will have the crown jewel of luxury retailers in its portfolio, it has been considering the SFA business for some time. The rationale is that Neiman’s would remain the exclusive high-end luxury chain, while SFA could be brought down a notch as a way to cater to the more aspirational consumer who shops for luxury at the department store level, on par, perhaps, with Bloomingdale’s, which is part of Federated Department Stores. TPG could even convert some of the SFA sites into a Neiman’s.

Acquiring SFA would be an attractive addition to TPG’s portfolio, which includes the J. Crew Group. TPG could exit these investments by offering a retail group in the public or private market that covers the luxury (Neiman’s), department store (SFA) and specialty (J. Crew) channels.

J. Crew recently announced a $200 million initial public offering.

Among shareholders of Saks Inc., particularly hedge fund investors, the expectation is that all of Saks Inc. will be sold. But at what price tag?

According to a financial analyst on the sell side, the lackluster SFA business, and the fact that an expected bidder already has dropped out, suggests there’s little likelihood that Saks would garner a premium the way Neiman’s did, which was bought for a per-share premium of more than 35 percent.

Adding in the Club Libby Lu and department store businesses, the analyst said the entire company might be sold in pieces that add up to $25 to $26 a share. Whether the price would be pushed a little higher would depend on how many bids there are and who’s making them. Shares of Saks, the analyst noted, have been trading in the $24 range and have “already built in the possibility of the sale of the company.”

Also keeping tabs on which route the sale process takes are the factoring firms on Seventh Avenue. Factors are companies that handle a supplier’s accounts receivables for a fee. A critical part of the factoring process is assessing the creditworthiness of retailers.

One factoring executive said orders have been approved through the end of September for suppliers shipping to Saks Inc., which means fall goods are in place. However, future orders are dependent on whether Saks can make good on its promise to file certain financial information with the Securities and Exchange Commission, which is investigating its markdown policies along with federal prosecutors.

In announcing the conclusion of its internal investigation on Wednesday, Saks reiterated its plans to file those statements within the next few weeks.

Many of the vendors affected in the markdown scandal are in the bridge department.

One of the first companies to file a lawsuit against Saks this year in Manhattan federal court, Onward Kashiyama, alleged the retailer took more than $9 million in deductions and credits not agreed upon. A Saks Inc. spokeswoman said the case has been settled. She declined to provide details.

Donald Kreindler, an attorney at Phillips Nizer, is representing International Design Concepts, which also filed a lawsuit against Saks. IDC is the assignee of assets for Apparel Group International, the licensee of Oscar de la Renta for the Oscar by Oscar de la Renta trademarks. Apparel Group International was driven out of business as a result of Saks’ chargeback policies, Kreindler said.

“Saks told us they’re [IDC] owed $1.3 million,” Kreindler said. “Since then, we’ve been attempting to learn how they calculated that number. We think our client is owed a great deal more.”

Saks couldn’t be reached to respond to Kreindler.

Kreindler said Saks took markdown allowances of $32 million on sales of $91 million, “not to mention all the other chargebacks. Saks admitted falsifying reports to vendors.”

In the case of IDC, Kreindler said Saks didn’t take into account sales of Oscar by Oscar de la Renta merchandise at Off 5th.

“The next step for our client is to obtain the discovery to get the opportunity to examine the appropriate documents and take depositions,” Kreindler said.

Other bridge vendors with large businesses at Saks include Ellen Tracy, Dana Buchman and Elie Tahari.