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M&A Update: Retailers and Vendors in Play

From the bidding for Barneys by two competing Middle Eastern firms to the sale of the Stride Rite Corp. to Payless ShoeSource Inc., mergers and acquisitions activity over the past month has kept up a heady pace.

From the bidding for Barneys by two competing Middle Eastern firms to the sale of the Stride Rite Corp. to Payless ShoeSource Inc., mergers and acquisitions activity over the past month has kept up a heady pace.

Earlier this month, the Qatar Investment Authority and Istithmar from Dubai were said to be in competitive bids for Jones Apparel Group’s Barneys New York business. Although the companies either could not be reach for comment or declined comment on the possible bidding, WWD learned from industry sources that the pricetag being discussed was between $1 billion and $1.2 billion. Several banking sources said a bidding war between the two investment firms could drive the price as high as $1.4 billion. There are 34 stores in the Barneys chain.

As first reported in WWD, market sources here and overseas initially linked a private equity fund connected with the royal family of Qatar as the front-runner for Barneys. Qatar Investment Authority is a state-owned firm. Investment divisions of the QIA include Qatari Diar and London-based Three Delta. It is described as a $40 billion fund.

Dubai’s investment arm is Istithmar. The fund’s real estate holdings include assets in the U.S. and abroad, and includes discount retailer Loehmann’s. WWD reported that Istithmar is believed to have the inside track in the bidding for Barneys.

As investors and bankers were trying to figure out how Barneys would play out, Payless ShoeSource announced a deal for Stride Rite that surprised the M&A community. The company said it was picking up Stride Rite for $800 million plus debt.

Payless said it would be renaming the growing company Collective Brands Inc. and will operate three separate divisions: Collective Licensing, Payless ShoeSource and Stride Rite. Matt Rubel, Payless’ president and chief executive officer, will be ceo of the parent company, Collective Brands.

David Chamberlain, chairman and ceo of Stride Rite, said the company was “talking to analysts about the strong consolidation trend in wholesale and retail and our board decided it would be better for us to be part of a larger company. Payless made a compelling offer for shareholders.”
The pricetag represents a 32 percent premium on shares of Stride Rite when the deal was announced.

Two weeks ago, Genesco Inc. formally rejected Foot Locker’s $1.2 billion bid for all outstanding shares of the company, or $46 per share. Genesco’s Hal N. Pennington, chairman and chief executive officer, said in a statement that the company’s board “unanimously rejected the proposal and concluded that it did not reflect the long-term value of Genesco, including its strong market position and future growth prospects.”

On May 21, footwear brand Skechers USA Inc. and Genesco Inc., which has retail brands such as Lids and Journeys in its stable, as well as Dockers Footwear, was reported by WWD as the two leading targets to be taken private in the retail and footwear sectors, according to financial sources.

A buyout firm was said to be in discussions with both companies to take them private in separate deals, sources said, “indicating that the buyout firm is possibly Kohlberg Kravis Roberts & Co. Those sources also said the plan, after the two transactions are completed, is to combine the two businesses into one company,” WWD reported.

For a detailed look at the stories behind the headlines, see the following archived articles:
Bidding for Barneys: 2 Mideast Equity Firms Said Driving Up the Price
Monday, June 04, 2007

Payless in Deal For Stride Rite
May 23, 2007

Skechers, Genesco Said to Be Private Equity Targets
May 21, 2007