The bidders for Saks Inc. and its assets include a retailer with $1.3 billion in sales and a vendor with one foot in retail, as well as private equity firms flush with cash and eager to invest it. The private equity firms are described by bankers and investors in the retail industry as aggressive and disciplined. When it comes to business deals, these firms usually make an acquisition with a clear exit strategy to recoup their investment along with a 20 percent or more return. Private equity players also have no qualms about walking away from a deal.
Apax Partners Inc.: Apax has raised more than $20 billion in capital with investments in 340 companies worldwide. The venture capital and private equity firm has offices in the U.S., Europe and the Middle East. Apax typically partners on deals with other venture capital firms and leveraged buyout companies. Last year, the company acquired a controlling interest in Spyder Active Sports, a deal valued at $100 million.
Apollo Management LP: Apollo, with headquarters in Purchase, N.Y., was founded in 1990, and describes itself as one of the “most active and successful private investment firms in the U.S.” The firm has managed about $13 billion in capital. Robert DiNicola, former chairman and chief executive officer at Zale Corp., is a retail adviser. Apollo was co-founded by Michael S. Gross, who serves on the audit committee of Saks Inc. and is a member of the retailer’s board.
The Blackstone Group: The Blackstone Group is a New York-based private equity, real estate and financial advisory firm that was founded in 1985 by Peter G. Peterson and Stephen A. Schwarzman and had $400,000 on its balance sheet. The company now manages $14 billion worth of capital. Holdings include Allied Waste, Celanese, Houghton Mifflin, Spirit Group, TRW Automotive, Texas Genco and Universal Orlando. Blackstone has also partnered on deals with companies such as AOL Time Warner, AT&T and Sony Corp. The Blackstone Group had partnered with Thomas H. Lee Partners in a bid for The Neiman Marcus Group, but they lost out to Texas Pacific Group and Warburg Pincus, which this year acquired the luxury retailer for $5.1 billion.
Bon-Ton Stores Inc.: This publicly traded retailer posted sales of $1.3 billion last year. It operates 139 department stores under the Bon-Ton and Elder-Beerman nameplates. The company, based in York, Pa., has stores in 16 states clustered between the Midwest and the Northeast. In its most recent financial results, Bon-Ton widened its second-quarter loss to $1.4 million from $388,000 in the previous year. Sales for the second quarter declined 3.5 percent to $274.3 million.
Cerberus Capital Management LP: This private equity firm, based in New York City, is no stranger to retail. With capital in excess of $14 billion, Cerberus partnered with Sun Capital Partners last year to buy Mervyn’s from Target Corp. for $1.2 billion in cash. The company also owns Rafaella Sportswear and Fila. This year, the company tapped Vanessa Castagna, former chairman and ceo of J.C. Penney Co. Inc., to oversee the firm’s investment in Mervyn’s.
Jones Apparel Group: Jones Apparel is a $4.6 billion vendor of fashion apparel, shoes and accessories. The Bristol, Pa.-based company supplies retailers with bridge, better and moderate apparel, as well as junior apparel and denim and licensed goods. Last fall, the company acquired Barneys New York for $397.3 million.
Texas Pacific Group: TPG was founded in 1993 by David Bonderman, James Coulter and William Price and manages $20 billion worth of capital. Based in Fort Worth, this private equity firm just added The Neiman Marcus Group to an investment portfolio that includes J. Crew Group, Bally Management Ltd. and Ducati Motor Holding SpA. In a 2004 interview with the Harvard Business School student newspaper, Bonderman said there eventually will be a shakeout of smaller private equity firms that can’t deliver high returns. He said if investors expect long-term yields in the public markets of 10 to 11 percent, “then the private equity firms should be yielding 16 to 25 percent, or they shouldn’t be in business.”
Thomas H. Lee Partners LP: This Boston-based private equity firm was founded in 1974 and typically considers growth companies for acquisition or investment. The firm manages about $15 billion of capital. Previous deals include: American Media, Cott Corp., Experian, Houghton Mifflin, Michael Foods, National Waterworks, Rayovac, TransWestern Publishing, United Industries and Warner Music Group.