By and  on October 12, 2010

More signs of resurgent merger and acquisition activity gave traders something to talk about on a slow trading day but were unable to push retail stocks into positive territory.

The S&P Retail Index finished at 463.28, down less than 0.1 percent. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all rose less than 0.1 percent.

The markets were left to digest news that The Gymboree Corp. had agreed to be taken over by Bain Capital Partners LLC, fulfilling expectations of a private equity takeover of the specialty chain geared to children and their parents, as well as Dollar Tree Inc.’s acquisition of the 85-unit Dollar Giant stores chain in Canada.

Gymboree agreed to be acquired and taken private by Bain for $65.40 a share, or $1.8 billion. The price represents a 57.4 percent premium to the company’s shares on Sept. 30, when reports of a possible private equity buy of Gymboree first surfaced, and a 23.5 percent premium to its closing price of $52.95 on Oct. 8. On Monday, shares rose 22.4 percent to $64.83.

The transaction — subject to the tendering of at least 66 percent of the company’s common shares and customary closing conditions — is expected to be completed by the end of the year. Third-party acquisition proposals may be solicited through Nov. 20.

Gymboree operates 1,037 stores under nameplates including Gymboree and Janie and Jack.

Sterne Agee retail analyst Margaret Whitfield pointed out the deal represents a multiple of 7.9 times, meaning enterprise value is 7.9 times the earnings before interest, taxes, depreciation and amortization for the trailing 12 months.

Dollar Tree’s acquisition of Dollar Giant, for $51 million, is the company’s first expansion outside the U.S. The deal is expected to close by mid-November.

Dollar Giant stores average 9,000 gross square feet and operate in British Columbia, Ontario, Alberta and Saskatchewan. The retailer prices its goods and consumables at $1 or less. (All dollar amounts have been converted to U.S. dollars at average exchange.)

Shares of J.C. Penney Co. Inc. rose 1.9 percent to $33.12. William Ackman’s Pershing Square fund disclosed on Friday that it had acquired a 16.5 percent stake in the Plano, Tex.-based midtier retailer and will work in conjunction with Vornado Realty Trust, which bought a 9.9 percent interest.

With the exception of Tokyo’s Nikkei 225, which lost 1 percent, major European and Asian indices moved ahead Monday.

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