NEW YORK — Bids for The Neiman Marcus Group are due today, and an announcement of the winning bid could come as soon as Monday.
As reported, bids are expected from two partnerships. Kohlberg Kravis Roberts & Co. and Bain Capital Partners are up against Thomas H. Lee Partners and The Blackstone Group.
A final price tag remains unclear, but would-be owners are expected to submit bids in the range of $110 to $113 a share, according to financial sources familiar with the bidding.
Meanwhile, shares of Neiman Marcus on Thursday fell $1.92 to close at $98.20 in trading on the New York Stock Exchange. The closing price on Wednesday was $100.12, which was the first time the stock hit the $100 mark.
Some fund investors were spooked by the decline Thursday, speculating that perhaps the high-yield markets — a source of debt financing — were tightening, and that maybe bids for Neiman’s might not reach $105.
The concern was sparked by a story in Thursday’s edition of the Financial Times on the acquisition of U.S. data storage group SunGard, and how investment banks financing the deal are struggling to find buyers for the debt. The March 28 deal for SunGard involved a consortia of seven private equity groups and, at $11.3 billion, represents the largest leveraged buyout since the Eighties. Many tracking the LBO sector consider SunGard to be the poster child for future deals.
However, the high-yield market remains the main driver of LBOs, and if the loans in the SunGard deal are not sold, that could crimp expectations about future LBO transactions, particularly if it looks as if investors aren’t willing to take on the risk. Financial sources said on Thursday that credit spreads have been widening, suggesting the market could be softening. And such a scenario would leave the bankers involved in SunGard with huge exposure.
But one key difference is that a deal for Neiman Marcus, at perhaps nearly $5.5 billion, is not likely to be as leveraged as the one for SunGard, said financial sources not connected with the bidding for the retailer, but who are familiar with how LBO deals are structured.
One investment source not connected with the Neiman Marcus deal said bankers structuring a bid would have already considered the possibility of a weakened market.
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