A shopper enters a Neiman Marcus store in Oak Brook, Illinois, a suburb of Chicago, yesterday. - REUTERS
NEW YORK (Reuters):
UPSCALE DEPARTMENT store chain Neiman Mar-cus Group Inc. said yesterday it agreed to be bought by two private equity firms for about US$5.1 billion, in a high-stakes bet on the luxury goods market's sustainability.
The company's shares slumped more than five per cent at the news, as some investors expressed disappointment with the deal's value and others scrambled to cash out after a sharp rise in the company's shares.
Neiman Marcus known for its high-end fashions and lavish Christmas catalogue offering items like personalised robots, Steuben crystal and rare sports collectibles has benefited from a boom in luxury goods sales in recent years.
Neiman said Texas Pacific Group and Warburg Pincus LLC will acquire all of the outstanding Class A and B shares of Neiman Marcus Group for US$100 per share in cash, a premium of less than two per cent over Friday's closing price of US$98.32.
Each of the investors will own equal stakes in the company upon completion of the deal, it said.
Neiman Marcus announced in mid-March that it was weighing a sale of the company, catapulting its shares upward. While the deal itself came as little surprise to Wall Street, many investors had speculated the chain could fetch well over US$100 per share, analysts said.
SPECULATION
"There was tremendous speculation that the combination of the stores plus the credit card unit could fetch upwards of US$115 per share," said Bill Dreher, senior retail analyst at Deutsche Bank Securities.
While he considers the deal's current value fair, the need for regulatory and shareholder approval and the six-month wait until the deal closes in November has made some investors eager to cash out, Dreher said.
TREMENDOUS GAMBLE
"They are taking a tremendous gamble ... that Neiman Marcus continues to perform on a monthly basis with same-store sales every month at the same, very impressive clip that it has done for the last couple of years," said Kurt Barnard, president of Barnard's Retail Consulting Group.
Neiman Marcus, operator of its namesake stores and the more specialised Bergdorf Goodman chain, has had six straight quarters of double-digit sales increases at stores open more than a year. The company said it expects same-store revenue to rise five per cent to six per cent in the third quarter.
