SAKS FIFTH AVE., ISETAN REPORTEDLY COMBINE ON OFFER FOR BARNEYS

Byline: Sidney Rutberg

NEW YORK — Saks Holdings Inc., parent of Saks Fifth Avenue, and Isetan Co. Ltd. have reportedly signed an agreement to make a joint bid to buy Barneys New York.
Isetan’s attorneys, however, denied Thursday that an agreement has been reached.
Terms of the reported agreement and a possible offer were not immediately available. However, any offer would have to be higher than the $240 million bid by Dickson Concepts of Hong Kong on Feb. 28, and would likely be composed mostly of Saks stock. Isetan is anxious to get a return on its more than $600 million investment in Barneys and therefore would not be likely to put new money into the deal. But Isetan’s interest in the flagship stores and its control over rental costs would serve as contributions to the Saks partnership. In addition, Isetan’s judgment against the Pressman family for $197 million in loan guarantees gives the Japanese retailer additional leverage in the bidding process.
Saks officials could not be reached for comment.
As reported in WWD, April 1, page one, Saks and Isetan recently resumed talks on the possibility of getting together on a bid to acquire Barneys, after an earlier agreement between the Japanese company and Saks expired last September.
The ground rules for bidding in the Barneys bankruptcy proceeding provide that bids must be submitted by May 8 and then undergo a 20-day review by Barneys. As reported, Barneys said it expects to reach a deal by May 28. According to one source close to Barneys’ creditors, all bidders will probably hold off until the last minute before the deadline.
“Why should any bidder go public with an offer before then? It doesn’t make sense to give other bidders time work up a competing bid based on the figures in the earlier bid,” the source said.
In addition to Saks/Isetan and Dickson, the Neiman Marcus Group is a potential bidder, though Neiman’s has said it will not engage in a bidding war for Barneys. Holt Renfrew and LVMH Moet Hennessy Louis Vuitton have been rumored to be interested, though LVMH denied the report and Holt Renfrew has said it plans to focus on its existing business in Canada.
The only bid currently on the table is the one from Dickson. Barneys’ creditors’ committee has rejected the offer, and Barneys also has called that bid inadequate, but Dickson is said to be prepared to go higher.
The team of Isetan and Saks makes a formidable combination. Isetan is the landlord of Barneys’ flagship stores on Madison Avenue and in Beverly Hills and Chicago. Barneys continues to dispute Isetan’s claim as owner of the three stores but so far has been unsuccessful in obtaining a court ruling to back up that claim.
For its part, Saks is a premier luxury goods retailer with strong management and publicly traded stock that could easily be used instead of cash for an offer.
In another development, attorneys for Isetan at Hughes Hubbard & Reed filed papers late Thursday opposing Barneys’ request for up to $10 million in break-up fees and expenses. Barneys wants the payout to go to an approved buyer who gets outbid by another buyer.
A source said Isetan is opposing the request because it feels excluded from the investor protection process.
Barneys is trying to force Isetan to accept less than its $25 million a year in rent for the three flagships.

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