KKR & Co. L.P. (NYSE:KKR) is considering investing in Saks Inc (NYSE:SKS), but the investment management firm might push the management of the luxury retailer to enter a merger transaction with Neiman Marcus Group, according to a report from Cristina Alesci & David Welch of Bloomberg, citing unnamed sources familiar with the issue.

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According to one of the sources who requested not to disclose his identity, KKR & Co. L.P. (NYSE:KKR)’s evaluation may not lead to an agreement. It is not clear whether the investment management firm reached out to the management of Saks Inc (NYSE:SKS) regarding its plan.

Bloomberg noted that the merger of Saks Inc (NYSE:SKS) and Neiman Marcus Group will establish an up-scale department store chain with over $7 billion sales per year. Nordstrom, Inc. (NYSE:JWN) is the largest high-end department store in the United States.

Saks Inc (NYSE:SKS) hired Goldman Sachs Group, Inc. (NYSE:GS) to explore the possibility of a buyout. Aside from KKR & Co. L.P. (NYSE:KKR), Leonard Green and Partners is another possible bidder to buyout the luxury retailer. Its flagship store located at Fifth Avenue in Manhattan has an estimated value of $1 billion.

The stock price of Saks Inc (NYSE:SKS) is up by nearly 14 percent to $15.55 per share on Wednesday in late afternoon trading in New York. Yesterday, shares of the company also surged by 11 percent during regular trading hours, after the company reported a profit that was in line with consensus estimates.

One of the sources opined that Saks Inc (NYSE:SKS) is exploring the possibility of a buyout because the value of its stock increased by almost 30 percent this year, and the interest rates are low. Potential buyers will be able to obtain cheap financing.

On the other hand, Neiman Marcus retained the services of Credit Suisse Group AG (NYSE:CS) to explore strategic options such as an initial public offering (IPO) or a sale of the company. People familiar with the situation cited that the owners of Neiman Marcus are looking at around $8 billion for the company.  In 2005, TPG Capital and Warburg Pincus LLC acquired Neiman Marcus for approximately $5 billion, based on data from Bloomberg.

KKR & Co. L.P. (NYSE:KKR) has a reputation for making investments in retail and consumer companies. In 2005 and 2007, the investment management firm acquired Toys “R” Us, and Dollar General Corp. (NYSE:DG) for $7.5 billion and $7.3 billion, respectively. KKR & Co. L.P. (NYSE:KKR) has approximately $78 billion assets under management (AUM) by the end of March this year.