Japan’s Fast Retailing In Talks To Buy J. Crew [REPORT]

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Japan’s Fast Retailing In Talks To Buy J. Crew [REPORT]

On the heels of men’s clothing retailers Jos. A. Bank Clothiers Inc (NASDAQ:JOSB) and Men’s Wearhouse, Inc. (NYSE:MW) bruising acquisition battle, women’s retailer J. Crew Group appears to be in a more civilized transaction to sell to Japan’s Fast Retailing Co Ltd (TYO:9983) for as much as $5 billion.

$5 billion price tag

According to a report in the Wall Street Journal, Fast Retailing approached J. Crew management about a potential buyout.  The terms of the deal have yet to be negotiated, and it is unclear if J. Crew’s $5 billion price tag is within the range of Fast Retailing Co Ltd (TYO:9983)’s budget.  J. Crew’s private equity partners took the firm private in 2010 for nearly $2.8 billion, thus selling could net a nearly 100% return on investment in four years.

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Approached by other suitors

Sources said private-equity-owned J. Crew had been approached by other suitors, but those suitors were not named. Talks are at an early stage and could collapse in coming days, the source cautioned.

Trying to build competition for sale of firm?

The release of information to a media source on a potential sale, and the disclosure of multiple suitors, could be construed as a subtle promotion plan to heat up the competition for J. Crew.

According to the Wall Street Journal report, the discussions come as J. Crew’s owners, private-equity firms TPG and Leonard Green & Partners LP, have been considering taking the retailer public. In early January, the report said the company asked Goldman Sachs Group Inc. GS +0.65% to initiate work on a potential initial public offering, the report said. But the IPO planning hasn’t progressed beyond that point, according to the report.

J. Crew has over 400 stores in the U.S., Canada and the U.K. Operated by retail industry executive Millard S. “Mickey” Drexler, its revenue rose 9% to $2.4 billion in the fiscal year ended Feb. 1.  The much larger Fast Retailing Co Ltd (TYO:9983), which employs more than 23,000 people and also owns Uniqlo, a men’s and women’s casual apparel retailer, has a market capitalization of nearly $36 billion.  It also owns Comptoirs des Cotonniers, Helmut Lang, Theory and Princesse Tam Tam. 

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Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com

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