NEW YORK — Investor pressure is building for Saks Inc. to make a move.
And Wall Street reacted on Friday by sending shares of the retailer down 9.3 percent. Investors were disappointed that one potential bidder, Cerberus Capital Management, decided not to bid, and that Saks Inc. appears to be leaning towards the sale of just its northern department store group, and not also selling its Saks Fifth Avenue division.
A week ago Monday, Saks received bids for its northern group, which could have opened the door for anyone interested in buying the whole company.
But instead of premium offers well above current stock valuations such as what Neiman Marcus Group and May Department Stores garnered in their acquisitions by Texas Pacific Group/Pincus Warburg and Federated Department Stores, respectively, Saks was sniffed at and told by Cerberus that it was just too pricy. On Friday, WWD reported first that Cerberus was out of the picture. Financial sources had said last week that the price tag for Saks Inc. reached $29 a share.
On Thursday, sources close to the company said Saks hoped to make a decision on selling its assets by last weekend. Meanwhile, private equity, mutual and hedge funds with stakes in Saks mulled over a valuation for the retailer. Several hedge funds were expecting the entire retailer to be sold to a strategic bidder in partnership with a financial player. The lead contender was Bon-Ton Stores, which was said to be partnering with Cerberus.
Other private equity firms, such as TPG, The Blackstone Group, Bain Capital, Apax Partners, as well as Jones Apparel Group, were said to be examining Saks Inc., either its northern group or SFA. Shareholders had hoped there would be strong interest. Then a sabot fell into the works.
When news reached investors Friday morning that Cerberus backed out and other potential bidders were more interested in pieces of Saks Inc. rather than the whole company, Wall Street went into a selling frenzy. Shares of Saks dropped $2.23 to $21.82. Trading volume was 8.8 million, well above the stock’s three-month average volume of 1.7 million.
Some hedge fund managers as well as sell-side analysts said they were surprised by the stock sell-off. They speculated that it was due to Cerberus dropping out.
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