NEW YORK — Private equity players have snapped up yet another apparel brand, this time Eddie Bauer Holdings Inc., in a deal valued at $614 million.
Sun Capital Partners Inc. and Golden Gate Capital have formed a new entity, Eddie B. Holding Corp., which on Monday agreed to acquire Bauer for $9.25 per share in cash. That translates to a 4.5 percent premium on Friday's closing price of $8.85, although the company said the per-share price represents a 12 percent premium on the prior four weeks' average closing price of Bauer's common stock. The total transaction value includes debt to be repaid of $328 million. The deal, while expected to close during the first quarter of 2007, is still subject to the approval of shareholders and other customary closing conditions.
The parties to the transaction were unavailable for comment due to Bauer's pending earnings report. Bauer will host its third-quarter earnings conference call today after the market closes.
"We believe that the transaction will provide Eddie Bauer with new resources and the time necessary to execute our turnaround strategy. We look forward to partnering with Sun Capital and Golden Gate, who bring extensive experience in the retail and catalogue sectors, to take our company to the next level and to capitalize on the potential of the Eddie Bauer brand," said Fabian Mansson, chief executive officer of Eddie Bauer, in a statement.
Stefan Kaluzny, managing director at Golden Gate, said in a statement that his firm is looking forward to "working with the company to continue to serve its customers with outstanding products consistent with the Eddie Bauer heritage."
Golden Gate has been busy snapping up catalogue firms for its umbrella of investments. It owns Appleseed's, Sahalie, Solutions, Drapers and Damon's, Norm Thompson, The Tog Shop and its recent acquisition, Haband's. Golden Gate's acquisition also reunites Bauer with its two former catalogue siblings: The private equity firm also owns Spiegel and Newport News, both of which were part of the Spiegel Inc. bankruptcy in March 2003, as was Eddie Bauer. The outdoor and apparel retailer was spun out of Chapter 11 as a stand-alone firm on June 21, 2005.
More recently, Golden Gate on Friday said it had completed the recapitalization of Venus Swimwear Inc., WinterSilks LLC and Venus Manufacturing in partnership with the companies' existing shareholders."We are pleased to join with Golden Gate Capital in signing this definitive agreement to acquire one of the best-known brands in the apparel industry. We are particularly excited about the combination of the considerable experience of our respective firms in retailing, apparel and direct marketing and look forward to working with the management of Eddie Bauer to continue the success and growth of the brand," said Gary Talarico, managing director of Sun Capital Partners Inc.
Sun Capital includes in its portfolio of companies Mervyn's, Shopko Stores, Lillian Vernon, Anchor Blue Retail Group, Dim Branded Apparel and Most.
Shares of Bauer climbed 14 cents on Monday to close at $8.99 in over-the-counter trading.
One financial analyst said he was "disappointed in the price," and that he had hoped for a higher bid.
"From the Eddie Bauer shareholder perspective, they were able to capture a premium to market in a company that had announced it was considering alternatives. From the new shareholders' perspective, there remains a great opportunity with the Bauer name, which I hope they will be able to realize over time. It is a great price all around," said William Susman, president and chief operating officer of investment banking firm Financo Inc.
In its latest quarterly report, Bauer posted a second-quarter loss of $42 million, or $1.40 a diluted share, for the period ended July 1 against income of $69.5 million in the same year-ago three months, which included a pretax gain of $107.6 million related to the company's emergence from bankruptcy and its required adoption of fresh-start accounting. Total revenues in the period fell by 7.4 percent to $225.7 million from $243.8 million, while same-store sales decreased by 5.9 percent.
Standard & Poor's Ratings Services on Monday revised its Credit Watch listing of Bauer to "negative" from "developing." The company said the rating action followed the announcement of the pending sale. Bauer was initially placed on Credit Watch with developing implications on May 26, following the Redmond, Wash.-based firm's announcement that it intended to explore strategic alternatives to increase shareholder value.
"We believe that this transaction could increase debt leverage and weaken credit protection measures due to the potential for additional debt to fund the acquisition," said S&P credit analyst Ana Lai.Bauer was founded in 1920 in Seattle. The 375-unit chain, of which 108 are outlet stores, caters to men and women ages 35 to 54 with an average annual household income of $75,000, the company has said in regulatory filings. Eddie Bauer distributes its merchandise through retail stores and outlets located in the U.S. and in Canada and directly to consumers through catalogues and on its Web site. The company has a workforce of about 524 at its corporate headquarters in Redmond.
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