NEW YORK — The board of Jones Apparel Group is said to be exploring several strategic options — including a possible sale of the entire $5 billion company, according to financial and industry sources.
Market rumblings that the company may be exploring a sale have circulated for several months, but recently have gained momentum, culminating last week in intensified speculation that Jones was shopping its $1.9 billion Nine West division. Although industry sources told WWD that preliminary overtures have been made to a handful of strategic players for all of Jones, the expectation is that an acquisition would be made by a financial player. Sources also said a financial player’s exit strategy could include selling off Jones in pieces.
Efthimios P. Sotos, the apparel giant’s chief financial officer, declined comment Monday.
The sale of Jones now would be an atypical move, since the company is far from being in distress and certainly has more than adequate cash flow to run its businesses on a daily basis.
“You always try to configure your company in a way that will maximize shareholder value, and when that configuration stops working, you change it. That’s why a publicly held company might consider a change in ownership or divestiture at any given time. You always want the public market to perceive the highest value for each of the operating segments you are in,” said Richard Kestenbaum, partner at investment banking firm Triangle Capital.
Another banker who specializes in the apparel sector said, “Peter [Boneparth, Jones’ chief executive officer] is a deal-maker who is focused on shareholder value. If he can get shareholder value by selling the company, then he should do it.”
Jones has a market capitalization of $3.52 billion. With shares trading in the $30 range, a target 20 percent premium would raise the price tag to $36 per share. At 114 million shares outstanding, that would garner $4.1 billion. In the current cash-rich environment for private equity players, bankers believe Jones is the kind of company, with its multibrand, multitier strategy, that would bring many potential investors to the table. The current share price has been relatively constant in recent years even as Jones’ revenues have grown, to $5.07 billion last year from $4.07 billion in 2001.
“Jones has a great out-of-the-box thinking leader in Peter Boneparth, and a strong operating team led by Wes Card [chief operating officer]. The company has great brands that the retailers buy because consumers want to see them in the stores,” said apparel consultant Emmanuel Weintraub, president and ceo of his eponymous firm.
Sources said it is unlikely any strategic players would acquire Jones. Taking Jones private would give Boneparth more control in reshaping the company outside of the proverbial glass fishbowl that public firms inhabit, and perhaps a better shot at repositioning Jones in order to eventually make a run for Saks Fifth Avenue, the banker said.
Jones’ future became the topic de jour in the market over the past month when the sale of Nine West surfaced at the WSA Show, a trade event for the footwear industry. A few days later, apparel executives at MAGIC, the fashion trade show, heard similar rumblings. It was along the lines that something “big” was happening at Jones, as one source said. Last week, WWD reported Jones could be quietly shopping Nine West.
A banker specializing in the apparel sector said Monday, “Something had to happen where either Jones made a very big acquisition or it sold Nine West, or it sold the whole company. There is very little they can do to move the needle.” The banker said it’s hard for large companies to make an acquisition that’s substantial enough for Wall Street to take notice. So when they can’t do a deal themselves, the banker said companies often have to “rejigger” the company in a way to create shareholder value.
The banker said Jones can’t make the deals it used to complete — such as when it bought moderate apparel firm McNaughton Apparel Group, formerly known as Norton McNaughton, in 2001 for $572 million — because there’s a scarcity of ideal targets, companies that have scalability in sales and profits. The McNaughton acquisition brought Boneparth into the Jones fold and also gave it the Norton McNaughton, Erika, Energie, Currants and Jamie Scott labels, as well as an entry into the mass chains.
Sidney Kimmel, co-founder and chairman of Jones, bought Nine West in March 1999 for $1.48 billion. Following Nine West, he bought jewelry firm Victoria & Co. in 2000, and a week after the McNaughton acquisition purchased Judith Jack.
Acquisitions under Boneparth’s reign include bathing suit brand Kasper from bankruptcy — which included the Anne Klein business — Maxwell Shoes and, in his biggest strategic move thus far, Barneys New York.
Barneys, which Jones bought in December 2004 for $397.3 million, is considered one of the better moves. The luxury customer is still buying, and an expansion plan for Barneys is in place. However, Barneys still only represents a small contribution to the consolidated businesses.