By and  on January 24, 2006

NEW YORK — The red-hot merger and acquisition market of last year is continuing into 2006 and Eddie Bauer is the latest target in the sights of strategic and financial players.

The M&A frenzy was further in evidence Monday with two big deals: The Sports Authority said it was being acquired for $1.3 billion in a partial management buyout (see related story, page 16), while CVS Corp., Supervalu and an investment group led by Cerberus Capital Management LP teamed up to buy supermarket and drugstore retailer Albertson's for $17.4 billion in stock, cash and debt.

These deals come one month after a year that has been described as the best M&A activity since 2000. In 2005, there were more than $2.7 trillion in mergers and acquisitions announced worldwide, $1.13 trillion in the U.S. alone, according to Thomson Financial. But if there was $100 billion in private equity money out there chasing acquisitions in 2005, observers say there's just as much around this year.

Regarding Eddie Bauer, financial sources said that among those eyeing the outdoor lifestyle firm are VF Corp., Liz Claiborne, Kohlberg Kravis Roberts & Co. and Texas Pacific Group. Of the four, VF is said to be "very interested" in Bauer. Claiborne, while keeping tabs on the specialty outdoor brand, is also in the midst of negotiations to acquire J. Jill Group Inc.

While Texas Pacific Group is the latest private equity firm said to be checking out Bauer, KKR is the buyout firm with the most extensive knowledge of Bauer's operations. KKR has bid before for Bauer, but was rebuffed by former parent Spiegel's creditor constituency during the catalogue retailer's bankruptcy. Spokesmen for KKR and TPG both declined comment Monday.

Bauer isn't officially up for sale, but it is said to be open to offers at the right price, financial sources said. A spokeswoman for Bauer declined comment.

Financial sources, including buy-side portfolio managers and analysts, said VF Corp. is keen to buy an "outdoor lifestyle" brand. At investment conferences earlier this month, these sources said VF executives told attendees it is looking for acquisitions with price tags of between $400 million to $1 billion, and that the preferred range is between $600 million to $800 million. VF, through its experience buying the Nautica brand, is said to be willing to buy a "situation that requires a turnaround," said one analyst.

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