CARSON'S MAKES BID TO BUY YOUNKERS FOR $17 A SHARE

Byline: Valerie Seckler

NEW YORK--Carson Pirie Scott & Co. disclosed Friday it made a bid to acquire Younkers Inc., the struggling regional department store chain based in Des Moines, Iowa, for $17 a share in cash.
Soon after the announcement, Younkers' stock closed at 19 on the New York Stock Exchange, indicating the market was expecting the offer to go higher.
Stanton J. Bluestone, Carson's president and chief executive officer, said $17 a share is a fair offer based on public information, but added, "If we get to see their books, and they can convince us that there is more value, then we may renegotiate."
He noted that while the premium offered did not seem very large (Younkers closed Thursday at 15 3/4) the reason Younkers' stock was that high was that "we bought about 1 million shares in the last week or so." He said, "Our buying propped up the price of the stock."
Carson's already owns 1,047,500 Younkers shares or about 12 percent of the total outstanding.
In a conference call with financial analysts, Bluestone said the offer translates to $152 million in cash plus the assumption of $80 million of Younkers' debt.
Carson's first contacted Younkers about the deal Thursday afternoon, holding a conversation with Robert Mosco, president and chief operating officer, Bluestone noted.
Younkers officials could not be reached for comment.
In a statement Friday, Younkers said it will review Carson's offer "in due course." Carson's said about six months ago that it was eyeing targets for external growth.
"We considered [Younkers] ideal because [like Carson] it's in the traditional department store business--with customers and vendors similar to ours--and its stores are located in contiguous markets."
Told of an analyst's report that Carson's board chairman Mark Dickstein is driving its aggressive effort to expand its equity holdings in the retail market, Michael MacDonald, the retailer's executive vice president, told WWD, "We think external growth is essential and our board, including Mr. Dickstein, agrees."
Bluestone told WWD that Carson's expansion strategy also includes "internal growth," primarily through its ongoing store renovation program.
Carson's which operates 59 department stores, has a strong share of the Milwaukee, Chicago and central Illinois markets, said Bluestone, as well as a "significant presence" in Minneapolis. Younkers, which operates 53 department stores, has a strong share of markets in Iowa, Wisconsin and Michigan, he noted. Younkers also operates stores in Illinois, Nebraska and South Dakota.
"Younkers provides us with locations in contiguous states with very little overlap, as well as providing growth westward into Iowa, Nebraska and South Dakota," said Bluestone.
Carson's has identified "considerable opportunities for cost savings" with the Younkers acquisition, according to the chief executive.
He declined to comment on an analyst's projection that the savings would amount to the typical 1 percent or so of the retailers' combined sales, or roughly $17 million. Younkers' fiscal '93 sales totaled $597.9 million; Carson's totaled $1.1 billion.
However, the chief executive did say that Younkers focuses on middle-to-upper-middle-class consumers, as does Carson's, and that the combination of the retailers could enhance the value each provides for consumers. He further suggested potential for cost savings could be found in the retailers' similar approaches to merchandising, administration and distribution.
Carson's plans to finance the proposed acquisition with cash (the retailer had about $100 million on its balance sheet as of July 30), its 15 credit lines, and new debt and equity through a third-party placement.
While Younkers had not responded to the bid as of Friday afternoon, Bluestone saidCarson's "will be a disciplined buyer and will not overpay."
Bluestone explained Carson's derived its proposed purchase price by projecting the earnings-per-share and earnings-before-interest-taxes-depreciation-and-amortization (EBITDA) that could be achieved by the combined operations. "We think it's a particularly fair price given the performance of [Younkers] for the last several quarters," he asserted.
As reported, Younkers' earnings plunged 87.9 percent to $199,000 or 2 cents a share, in the first quarter ended April 30 as sales fell 5.4 percent to $125.6 million. The retailer earned $901,000 or 10 cents a share in the second quarter ended July 30, against a year-earlier operating loss of $361,000. Sales in the second quarter slipped 1.2 percent to $125.3 million.
Further, Carson's chief executive said the retailer's plans to finance the deal would enable Carson's to continue its store remodeling plan--"one thing that's driving our top and bottom lines"--and expand it into Younkers.
Bluestone also projected the acquisition would be slightly dilutive to Carson Pirie Scott's earnings-per-share in the first year following the deal, taking cost savings into account, and subsequently would boost the bottom line. He also projected the deal's effect on the combined retailer's EBITDA as positive in its first year.
Carson Pirie Scott had net income of $5.8 million, or 28 cents per share, for the six months ended July 30, against a year-earlier loss of $30.3 million. EBITDA was $21.7 million, up 17.9 percent from $18.4 million. Sales advanced 4.1 percent to $491.4 million from $481.3 million.
--Fairchild News Service

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