NEW YORK — Whoever eventually ends up buying Neiman Marcus Group, Burt Tansky is likely to be a happy man.
As speculation continues to swirl over potential bidders for the luxury retailer and some observers predicted a deal could come within weeks, Neiman Marcus late Friday said in a regulatory filing that Tansky, its president and chief executive officer, and 10 other high-ranking executives had been given golden parachutes potentially worth millions should things not work out with any new owner.
Based on Tansky’s 2004 base salary, his severance package alone could be worth at least $3.75 million under the new agreement.
Meanwhile, names of potential bidders for Neiman’s continued to swirl in the market. As reported, four consortia are said to be forming to eye a bid for Neiman’s, including one led by Texas Pacific Group and an unidentified strategic partner. Speculation on the possible strategic partner ranges from Nordstrom Inc. to Lane Crawford of Hong Kong.
A spokeswoman for Nordstrom said Friday, “We do not comment on specific acquisitions rumors or speculation.” Executives at Lane Crawford could not be reached for comment.
As for the severance agreements, financial sources who have been tracking the sale process said on Friday that the Neiman board is essentially “protecting” its executive team in case a buyer decides it no longer needs them. One hedge fund source called the move “typical” when you have a board that has already expressed an interest in selling the company.
According to the 8-K form filed with the Securities and Exchange Commission, the executives who signed agreements also include Karen W. Katz, president and ceo of Neiman Marcus Stores; James E. Skinner, senior vice president and chief financial officer; Brendan L. Hoffman, president and ceo of Neiman Marcus Direct, and James J. Gold, president and ceo of Bergdorf Goodman.
The severance agreements come into play in the event of a “change in control” of the company and the termination of the executive’s employment by the company without cause within two years following the change in control.
In such a scenario, the executive would receive a cash severance package equal to two times annual base salary, a target bonus and the continuation of certain benefits such as outplacement benefits, accelerated vesting of benefits under the retailer’s retirement plans and continuing coverage under the firm’s group health and life insurance plans for two years. In the case of Tansky, he gets three times his annual base salary, plus the target bonus and certain other benefits, which includes three years of the firm’s group health and life insurance plans.The agreement further protects the executives in case an individual’s employment ends in anticipation of the change of control at the request of the buyer, or at the request of the executive for good reason within two years following the change of control.
In the event of an anticipatory termination, the executive receives an “amount equal to the base salary from the date of termination through the date of the change-in-control transaction and any bonus for the most recently completed fiscal year,” the filing said.
“This is a good sign. It is forward thinking on the part of the board,” said one hedge fund analyst who, like the other financial sources and analysts quoted, requested anonymity because of his company policies. They are all based in New York.
An analyst at a private investment house said, “This is definitely a positive. There is definitely going to be a sale and the timeline is that it will be fairly soon, maybe even within two weeks.”
The analyst noted that the severance agreements are fairly standard, particularly when a company has decided to sell. The individual also said that the packages didn’t seem unreasonable. “This is the best-run company out there. You have to look at who got this retailer to the level it is at right now. I would be shocked if whomever buys Neiman Marcus doesn’t also try to lock up management,” the analyst said.
As reported, bids for Neiman Marcus are expected to be submitted within the next two to three weeks. Whether the bidding goes into a second round depends on the quality of the bids received.
The four partnerships in the latter stages of due diligence in the Neiman’s sale are said to be Thomas H. Lee Partners and Blackstone Group; Kohlberg Kravis Roberts & Co. and Bain Capital Partners; Apollo Advisors and Leonard Green & Partners, and TPG with its unnamed strategic partner.
The expectation in the financial markets is that the purchase price will be in the $5 billion range, or $100 a share. If a second round of bidding is necessary, the price could climb higher, to possibly $105 a share. Several hedge fund players in New York on Friday didn’t seem fazed by that assessment, even though that share price would bring the deal closer to a $5.25 billion price tag. They rationalized that Neiman’s should command a premium because of its good real estate locations, great management team and the fact that it is the top player in the luxury retail market in the U.S.Shares of Neiman Marcus on Friday closed at $91.25 on the New York Stock Exchange, up 26 cents, in heavy trading volume of nearly 1.3 million shares. The average trading volume over a three-month period is just 344,090 shares. Friday’s closing price was just shy of the stock’s 52-week high of $91.56.
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