NEW YORK — Peter Boneparth, chief executive officer and president of Jones Apparel Group, said the move to put the company up for sale was done to bolster shareholder value.
Now it's looking like this strategy may signal a trend in the M&A market. Last week, Charlotte Russe Holding Inc. said it was "evaluating strategic alternatives" for its troubled Rampage chain as the specialty retailer posted a wider second-quarter loss on a sales gain of 34.7 percent. Management did not reveal what those alternatives for Rampage would be, but financial sources said it could include a sale of all or part of the 66-store Rampage chain.
Although these are different types of businesses, they have one thing in common: They are public companies whose stocks have been caught in a $10 spread rut. Shares of Charlotte Russe have bounced between $10 and $20 since June of 2003, while Jones Apparel Group's stock has traded between $25 and $35 for the past 18 months. A company considering options to sell its assets is likely driven by a need to jolt its stock valuation.
"Companies are reviewing options out of frustration," said William S. Susman, president and chief operating officer of Financo Inc. "It's frustration that the market isn't properly valuing them. Frustration they can't reinvent the business in the public scrutiny. Frustration that their performance isn't better, and that they need to deliver immediate shareholder value."
Susman said reviewing alternatives such as a sale "can be a healthy exercise in self-exploration."
"When a multibillion-dollar company with hundreds of stores opens a new concept, it can take years of tweaking, yet represent a fraction of total sales," Susman explained. "The smaller the task, the more management attention it takes. Companies are better served seeking to take on larger, but manageable, change [acquisitions or divestitures] to improve value."
Right now may be a good time to take on that change. Sources estimate that there is well over $130 billion of private equity and hedge fund money looking to be invested in the U.S. alone. With Jones, the expectation in the market is that the entire company would be taken private.
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