TPG and Warburg Pincus’ talks to sell Neiman Marcus Group to a financial consortium are said to be heating up, making an initial public offering of the luxury retailer less likely.
Sources said over the weekend that sale talks are in the later stages, and that the situation is fluid. That means that negotiations could still break up, or get wrapped up fairly quickly provided certain matters still at issue become resolved sooner than expected.
The transaction, if an agreement is reached, is believed to be for more than $6 billion.
The two private equity firms were said to be seeking over $7.1 billion in April when word first surfaced that they were pursuing a dual track to explore options for the specialty retailer. The dual track, a sale of the company or an IPO, is the typical strategy these days for financial sponsors looking to exit their investment.
TPG and Warburg Pincus bought Neiman’s in 2005 for $5.1 billion in a cash-and-debt deal. Leonard Green & Partners subsequently acquired a stake in the company.
The Wall Street Journal on Sunday reported that the two financial buyers in discussions to acquire Neiman’s are Ares Management and the Canada Pension Plan Investment Board.
Ares Management has experience investing in the fashion industry. It is a one-time owner of Maidenform Brands Inc. in 2004, and also had taken a look at Saks Inc. Ares also is among a handful of financial sponsors of Advanstar Global LLC, a trade show operator.
CPPIB is an investment organization that invests the assets of the Canada Pension Plan. It invests globally, and had $188.9 billion in net assets as of June 30.
It was thought in recent weeks that Neiman’s owners were closer to an IPO since there didn’t seem to be any interest from a strategic buyer. Private equity firms have essentially three options when exiting their investment: a sale to a strategic buyer, an IPO or a sale to another financial sponsor.
Often the preference is a sale to a strategic buyer who might be willing to pay more and garner some back office synergies with its existing platform. Flipping to another financial sponsor hasn’t been as prevalent because they are thought to be not as willing to pay as much as strategic buyers. That thinking might change, since many financial buyers are still flush with cash that needs to be put to work.
In the case of Neiman’s, the two private equity firms also have an incentive to sell the company, even if it means a deal for less than the original asking price. That’s due to concern in recent weeks that the IPO window might close, given worries that the U.S. economy would slow and the uncertainty of the impact of the political backdrop overseas in Syria.
In addition, an IPO wouldn’t provide the private equity firms a complete exit from their investment. An IPO would be only for a small part of Neiman’s, with the owners retaining a majority stake, sources said. That raises risks that down the road the balance of their stake might garner a lower valuation if the economy suffers as it did in 2008 and luxury consumers pull back on their purchases, one financial source said.
If these talks break up, the odds are still in favor of a sale instead of an IPO. Sources said KKR & Co. and CVC Capital is another consortium that has been circling Neiman’s for several months, and are potential backup buyers. KKR, in particular, has been eyeing Neiman’s and at one point was looking at a possible combination of Neiman’s and Saks. Saks subsequently inked an agreement to be acquired by Hudson’s Bay Co. The go-shop period for Saks has ended. KKR could take another look at Saks but would have to pay a higher break-up fee if it elects to pursue the retailer again.
“Azzedine has been one of the biggest influences in my life. He has always been such a strong, loving, fatherly figure to me. I call him Papa. His designs are indescribably unique, they are pieces of art. He knew how to make the female form look its loveliest. I have so many memories of him; my favorite might be during my first show with him in Paris. He liked me and he wanted to help me get more work. He called all his friends at Kenzo and Comme des Garcons, and asked them to book me. They said, ‘But she can’t walk!’ And he said, ‘but she has such a great ass!' His friendship and support has been the great privilege of my career. I can't imagine life without him. Repose en paix mon Papa.” - @stephanieseymour tells @wwd. #wwdfashion (📷: @steveeichner) #alaia #azzedinealaia
Azzedine Alaïa, flanked by two of his closest friends, models Stephanie Seymour and Naomi Campbell.
He designed Seymour’s dress for her 1995 wedding to Peter Brant, and treated Campbell (who famously called him Papa), like a daughter. For more on the legendary designer, tap the link in bio. #wwdfashion #alaia #azzedinealaia
Azzedine Alaïa's “I-did-it-my-way” ethos stood out starkly at a time when brands are experimenting with consumer-facing fashion shows, coed formats and trans-seasonal collections – anything to perk up lackluster sales of ready-to-wear in an age of Insta-everything. “It’s not creation anymore. This becomes a purely industrial approach,” the late designer told WWD in an interview last year. “But anyway, the rhythm of collections is so stupid. It’s unsustainable. There are too many collections.” Read more about the iconic designer’s life and work on wwd.com, link in bio. #wwdfashion #azzedinealaia (📷: @WWD Archive, 1986) #alaia
Sneaker reselling app @goat’s latest exhibit, "The Greatest: New York," tells the story of New York's sneaker culture. To celebrate the exhibit, an intimate crowd gathered on Thursday night at the pop-up gallery space, located at Platform in Culver City, to hear guest speaker and illustrator @esymai talk about her own rise in streetwear and women in the business. "For me I'm just someone who is creative. I like to create things," said Chang. #wwdfashion
Azzedine Alaïa, one of the most iconic couturiers of the modern era whose body-con designs defined Eighties fashion, has died in Paris. The diminutive Tunisian-born designer, known for his structured knitted dresses with fitted waists and impeccably cut, figure-hugging second skin silhouettes was deeply admired by his peers, and counted supermodel Naomi Campbell - his adoptive daughter - among his inner circle, one of a gang of glamazons including Farida Khelfa, Carla Bruni and Stephanie Seymour who became ambassadors of his style. (📷: Alexandre Guirkinger) #wwdblast