MARKS & SPENCER OFFICIALLY PUTS BROOKS BROS. ON BLOCK

Byline: James Fallon

LONDON — Brooks Brothers is officially for sale.
Marks & Spencer PLC said Thursday it will pull out of the U.S. by putting its Brooks Brothers and Kings supermarket subsidiaries on the selling block, resolving persistent speculation that the men’s chain would be sold.
The sales are part of a major restructuring of the London-based company’s international operations, including closing its business in continental Europe and franchising its 10 stores in Hong Kong, to focus on turning its struggling U.K. retail operations around.
“Brooks Brothers and Kings are both excellent businesses and have been improving their performances,” Luc Vandevelde, Marks & Spencer’s chairman, said at a press conference. “But they are not in line with our strategy of developing Marks & Spencer as a retail format in the U.S. or anywhere else.”
Marks & Spencer hopes to sell the businesses within 12 months and said that Brooks will be swept up in the luxury market takeover fever. “I’ve had several calls over the last year showing interest in Brooks Brothers,” Vandevelde said.
Speculation on possible buyers focuses on LVMH Moet Hennessy Louis Vuitton and Gucci NV. Other potential purchasers include the Texas Pacific investment group, which owns Bally; Della Valle Group, which last year signed a franchise agreement with Brooks Brothers in Italy, and Dickson Concepts, which has a franchise agreement with Brooks in Southeast Asia.
Others seen as potential suitors for Brooks include Polo Ralph Lauren; Talbots, which reportedly is considering getting into men’s, but hasn’t been active in the acquisition arena, and The May Department Stores Co., which under chief operating officer Gene Kahn has moved into specialty retailing by buying David’s Bridal.
Brooks would also fit into the portfolios of Gap and The Limited, with possible sourcing synergies attainable. However, Gap is preoccupied repairing divisions and Limited is in a divestment phase and has had little success in men’s. Other names cited were Neiman Marcus Group, Men’s Warehouse and the Freeman Spogli investment group.
Joseph Gromek, Brooks Brothers’ chief executive officer, is credited with returning growth to the chain and was once rumored to be considering leading a buyout. He could team with a financial partner, such as Texas Pacific. “It is important for Brooks Brothers to continue to prosper and grow. Our associates are managed by an organization that could insure a positive future, so we’re keeping all our options open,” Gromek said.
“Anything is possible,” Vandevelde added, in response to the rumors. “We will look at anything that enables us to profitably dispose of those businesses.”
Executives indicated flexibility on price. In 1988, the retailer overpaid when it bought Brooks for $750 million. Kings cost $110 million. Robert Colvill, Marks & Spencer’s finance director, said: “We don’t expect to get $750 million for Brooks Brothers. We would hope to do better than $110 million with Kings, though.” The sale is being handled by Morgan Stanley Dean Witter.
Brooks had operating profits of $3.8 million on a 9 percent rise in sales, to $306.4 million in the half year ended Sept. 30. A year earlier, there was an operating loss of $8.2 million on sales of $281.1 million. Women’s wear has risen to represent 15 percent of sales.
Marks & Spencer operates 38 stores in France, Germany, Spain and the Benelux countries and has franchised operations in 30 countries.