NEW YORK — The recent deal for Lord & Taylor is just the first of several sales of retailers that are expected this summer, a group that includes David’s Bridal, Parisian, Eddie Bauer and maybe even Foot Locker.
Federated Department Stores Inc. is believed to be entertaining interest from private equity players for its Bridal Group, which has over 700 stores.
Parisian, owned by Saks Inc., is said to be near a sale with a strategic player. And Foot Locker Inc., according to financial sources, could be moving faster than expected to a sale, most likely to private equity players.
Federated Department Stores, which just agreed to sell its Lord & Taylor business for $1.2 billion to NRDC Equity Partners, is reportedly asking $1 billion for its Bridal Group. The Bridal Group includes over 240 David’s Bridal stores, 454 After Hours formalwear units and 11 Priscilla of Boston stores. Federated last September hired Credit Suisse First Boston and Bank of America Securities to divest the business, which Federated gained when it acquired May Department Stores last year.
Federated is believed to be rejecting consortium bids for the Bridal Group, which could limit the pool of possible buyers, financial sources said. In addition, Wall Street sources said Federated at this point is unwilling to split up the businesses, which also limits the list of potential buyers. Industry executives point out that there may be strategic players interested in buying just a nameplate, such as a men’s wear firm looking to buy the tuxedo chain but not the bridal shops. Thomas H. Lee Partners may be one of two buyout firms that has expressed an interest in the Bridal Group, according to private equity sources.
Saks Inc.’s 39-unit Parisian chain of department stores is said to be the intense focus of two bidders. One is George Jones, the former head of the Saks Department Store Group, who joined forces with private equity firm Freeman Spogli for a run at the retailer. Parisian, with an annual volume of $750 million, is a chain that Jones knows well, having once overseen its operation when he was at the SDSG before retiring from Saks Inc. last year.
SDSG at one time included the Carson Pirie Scott group of stores and the Proffitt’s and McRae’s businesses. The Carson Pirie Scott group was sold to Bon-Ton Stores Inc. The Proffitt’s and McRae’s chains were sold to Belk Inc. for $622 million in cash, plus the assumption of $1 million in capitalized lease obligations and certain other liabilities.
Belk is believed to be the other competitor eyeing Parisian. Financial sources pegged Belk as having the inside track. They also placed a value of Parisian at .8 times sales, or $600 million. That would be close to the cash component that Belk ponied up when it bought Proffitt’s and McRae’s from Saks. A real estate source familiar with the bidding suggested that Belk, if it won the bidding stakes, might convert some Parisian stores to the Belk nameplate.
While Parisian appears to be a possible strategic acquisition, that isn’t the case with Foot Locker Inc., which investment bankers and sources close to the buyout firms say is the exclusive focus of private equity interest.
Thomas H. Lee Partners and Apollo Management had expressed early interest in Foot Locker, but now are facing competition from other buyout shops, such as Kohlberg Kravis Roberts & Co. and the Blackstone Group. Sources close to KKR and Blackstone said the two are keen on Foot Locker and might consider pursuing a joint bid.
Sources indicated that a deal for Foot Locker could come sooner than originally anticipated. A longer process was expected in part because of its large store base. There was also the possibility that Foot Locker might try an acquisition first before seriously putting itself up for sale. Such a move would be a bet by the retailer that the purchase would make it more attractive to prospective buyers, said a former investment banker who is close to several buyout firms.
Now those investment bankers and private equity firms expect that a possible deal for Foot Locker could happen sooner because of concern in the financial markets that financing might be harder to complete later in the year due to recent unpredictable fluctuations in the market.