By and  on August 8, 2005

NEW YORK — A day of decision is nearing for Saks Inc. and its Saks Fifth Avenue division.

Speculation is heating up that bidding for the northern department store group of Saks Inc. will enter a new phase between the third week of August and Labor Day, and that the process will lead to offers to buy Saks Fifth Avenue Enterprises as well.

Financial sources in the investment community on Friday said Bon-Ton Stores Inc. and Cerberus Capital Management are partnering on a possible bid for all of Saks Inc., in the range of $28 to $30 a share. That represents a 38 to 48 percent premium above Friday's closing price of $20.25.

Other interested parties are said to be Bain Capital Partners, Thomas H. Lee Partners and Apollo Management. It's possible a consortium among these or other financial players could be formed. Executives at the private-equity firms either could not be reached or declined comment.

A meeting of the Saks Inc. board is scheduled this month, according to two sources, though Saks does not disclose when its board meets. The company would also not comment on the bidding.

A retail source said there were about five interested parties, which have been meeting in Milwaukee with the management of Carson Pirie Scott and Douglas E. Coltharp, executive vice president and chief financial officer of Saks Inc.

Bon-Ton's interest, as first reported by WWD, has been met by some skepticism in the retail community. Bon-Ton's business has been struggling lately and the company has grappled with its two-year-old Elder-Beerman acquisition, but Bon-Ton has been able to eliminate costs by combining operations. "The comp stores have not been positive, but they have dramatically reduced SGA, so margins are improving," said a retail chief executive officer. With the northern group, "Bon-Ton may have too much on their plate. The question is, how much debt can you take on and reasonably retire that debt over the next few years? I am sure they are trying to determine that with a financial partner."

The York, Pa.-based Bon-Ton operates 139 department stores and two furniture stores in 16 states from the Northeast to the Midwest under the Bon-Ton and Elder-Beerman nameplates. Last year, Bon-Ton had $1.31 billion in sales. Saks Inc.'s northern group generated revenues of $2.2 billion in 2004, with a store base of 143 units in 12 Midwestern and Great Plains states.

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