Neiman Marcus Growing Close To $6 Billion Sale To Ares

Neiman Marcus Growing Close To $6 Billion Sale To Ares

Neiman Marcus is in advanced talks to sell to a consortium of Ares Management LLC and a Canadian pension plan for about $6 billion.

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Neiman Marcus Growing Close To $6 Billion Sale To Ares

Michael J. De La Merced of Dealbook reports the deal to sell the luxury retailer could be announced as soon as this week, citing known sources.

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Neiman Marcus  Second deal in luxury industry

The proposed Neiman Marcus deal would signify the second deal in the luxury industry in recent times.

Earlier, Hudson’s Bay Co agreed to buy luxury retailer Saks Inc (NYSE:SKS) for $16 per share or $2.9 billion in cash, including debt. The operator of department store chains Lord & Taylor in the Unites States and The Bay in Canada indicated it would buy and bring Saks in Canada to compete against retailers like Holt Renfrew and soon to be launched Nordstrom, Inc. (NYSE:JWN).

Slower luxury spending

According to Bain & Co estimates, luxury spending in the U.S. grew just 5 percent in terms of constant-currency basis in 2012. This is almost half the 13 percent gain posted during the previous year.

Matthew Monks, Erik Schatzker & Cotten Timberlake of Bloomberg feel the U.S. retail sector is experiencing slow-down with some customers diverting their spending to bigger items such as cars, homes and home furnishings. They note the luxury chains, such as Nordstrom Inc and Macy’s Inc, which sell apparel and other discretionary goods have suffered as evidenced by their second-quarter sales trailing analyst estimates.

Change in private-equity owners

During 2005, private-equity firms Warburg Pincus LLC and TPG purchased Neiman Marcus for $4.9 billion. The private equity firms have been evaluating various options including pursuing an outright buyer for the retail chain. The private equity firms also explored an initial public offering of stock.

Mike Spector and Dana Cimilluca of The Wall Street Journal feel the proposed sale to Ares would be considered a decent outcome for the present private equity owners of Neiman Marcus.

Greg Roumeliotis of Reuters observes buyout funds ideally would have a lifespan of ten years. With Warburg Pincus and TPG having stayed for eight years, the proposed sale would be close to the upper limit of ten years, though they can seek extensions from their investors.

Dallas-based retailer Neiman Marcus operates 41 namesake department stores, Bergdorf Goodman, and lower-price outlet chains like Last Call and CUSP.

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Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports
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