By  on June 9, 2005

NEW YORK — Amid internal and external investigations of its Saks Fifth Avenue business, Saks Inc. may have found a buyer for its Northern Department Store Group.

Like most of the deals of the past year in the M&A market, the interested buyer is said to be a private equity player: Bain Capital Partners. A private equity firm is also the likely purchaser of Saks' Club Libby Lu chain, sources familiar with the business dealings said.

Sources said Saks began discussions with Bain about three weeks ago, and the deal could include other private equity investors.

Representatives for Bain Capital and Saks declined comment.

Another possible scenario is a management buyout of just Carson Pirie Scott, which would prevent the northern group from being split up. A jettison of certain locations is possible should a new owner, other than the proposed management-led buyout, acquire the entire Northern Department Store Group and then decide to flip certain store sites for cash.

One analyst said Carson's management team had at least one meeting with Saks Inc. executives about a potential buyout. Attending the meeting last week, sources said, was a representative from an unnamed private equity group working with Carson's management.

The analyst said a management-led buyout might not be Saks' first choice, since such a deal would "likely leave Saks with few options" for its remaining nameplates.

In addition to Carson's, the other mid-tier nameplates in the Northern Department Store Group are Bergner's, Boston Store, Herberger's and Younkers. Carson's is over 100 years old, and includes the Bergner's and Boston Store nameplates in its operation. The NDSG generated $2.2 billion in revenues in 2004, according to Saks.

As reported, Dillard's Department Stores had discussions with Saks regarding the entire NDSG. J.C. Penney reportedly also has expressed interest. Some retail analysts and financial groups in New York that were polled said they didn't expect either retailer to step up to the plate.

An analyst in New York at a sell-side firm said Wednesday that it was unlikely J.C. Penney would eye Saks' NDSG, but said that Bon-Ton Stores could emerge as a strategic buyer for the stores.

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