Saks (NYSE-SKS) is reportedly in play again, having apparently hired Goldman Sachs to "explore strategic alternatives including a possible sale of the company," the New York Post has reported. Meanwhile, back in the world of Wall Street rumors, Bloomberg is reporting that KKR & Co. is one of the Saks suitors and may be trying to merge Saks with Neiman Marcus.
The Post story, which had far too much fun with its "Saks Picks Sachs" headline, said the chain's Fifth Avenue New York City flagship store alone is worth more than a $1 billion. Other than KKR, the Post said that Leonard Green & Partners is also in the bidding. (Thus far, it seems limited to companies with "&" in their name, sort of an ampersand acquisition strategy.)
As for the Saks-Neiman merger possibility, Bloomberg said it would theoretically create an upscale department store chain with more than $7 billion in annual sales, "second only to Nordstrom in the U.S."
"You could obviously get a huge benefit to the bottom line," Michael Appel, founder of the retail consulting firm Appel Associates LLC in Purchase, N.Y. "You could keep the customer-facing part of the business—the branding, the merchandising—separate but you could then collapse the two back ends of the companies, like logistics, sourcing. You would get tremendous operating leverage."
KKR, which had more than $78 billion in assets under management at the end of March, has a long history of buying retail and consumer companies. In 2005 and 2007, the firm snapped up Toys "R" Us Inc. and Dollar General for $7.5 billion and $7.3 billion, respectively, according to data compiled by Bloomberg.
Saks' owners may seek about $8 billion for the company, which has about 40 namesake department stores and owns Bergdorf Goodman's two stores in New York, Bloomberg reported.
Deborah Weinswig, a senior retail analyst with Citigroup, issued a note Wednesday (May 22) pointing out that "this is not the first time that it has been rumored that (Saks) is for sale. We first contemplated (Saks) as a takeover target in January 2006."
The Citi note went beyond the usual observation that stores could be closed (an almost certainty whether the chains merge or not) and suggested specific numbers. She wrote of shutting down anywhere from five to 10 Saks Fifth Avenue stores and accelerated merged channel/omnichannel growth. She also predicted accelerated OFF 5TH expansion (66 stores in 1Q13 vs. 127 JWN Rack stores) along with global and margin potential improvements.
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