NEW YORK — The possible buyout of Foot Locker might have just been pushed into fast-forward mode now that its offer to buy Famous Footwear has been rejected.
According to industry and financial sources, Foot Locker made an offer to buy Famous Footwear from Brown Shoe in a deal valued at around $700 million. The offer recently was rejected by Brown Shoe, those sources said.
Both a spokesman for Foot Locker and a spokeswoman for Brown Shoe said their respective firms as a matter of policy do not comment on speculation.
A former investment banker who specialized in retail and apparel deals, and who still keeps tabs on the industry, said Foot Locker remains an attractive property for leveraged buyout shops because the retailer has “a lot of cash and great cash flow.”
A former Seventh Avenue executive described Foot Locker as a “natural [leveraged buyout] candidate” because the retailer is a “cash generator, which helps [the LBO shops] pay down the debt.”
Despite the LBO possibility, word kept surfacing since March that Foot Locker was eyeing an acquisition. Financial sources said then that the sale of Famous Footwear to Foot Locker would give Brown Shoe the cash to pursue a possible purchase of the Nine West unit from Jones Apparel Group. Discussions that Nine West was up for sale surfaced at the footwear trade show, the WSA held in Las Vegas in February. In March, Jones Apparel Group disclosed instead that it was putting the entire company on the auction block.
Since then, there’s been discussions within financial circles that private equity firms were eyeing Foot Locker, most notably Thomas H. Lee Partners and Apollo Management.
At first, it was believed that a deal for Foot Locker might take longer than expected in part because its large store base would require significant due diligence. There was also the possibility that Foot Locker might try an acquisition first before putting itself up for sale, which some sources said would make it more attractive to prospective buyers.