TheDeal: Is Saks an LBO Candidate or Strategic Target?
NEW YORK (TheStreet) -- Did Saks Inc. (SKS) hang a sale sign out for itself because of a hot market for luxury retail leveraged buyouts or because it's in the crosshairs of a strategic acquirer?
Those were the possibilities Wall Street bankers and analysts kicked around after The New York Post broke the news Tuesday that the iconic New York department store has hired investment bank Goldman, Sachs & Co. to explore strategic alternatives.
The Daily Deal has since confirmed Saks has hired the investment bank.
But one retail sector investment banker said hiring Goldman was more likely a defensive response to an investor that recently and significantly increased its stake in the company.
Saks spokeswoman Julia Bentley said in an e-mailed statement, "It is against our policy to comment on rumors or speculation."
Southeastern Asset Management Inc., which has been invested in Saks for several years, has had the biggest run-up in its share ownership within the past month. In a regulatory filing on Dec. 10, the investment firm reported it had boosted its stake to 17.8%. Then, by April 26, the firm raised its share of the company to 19.3%.
Although Southeastern is known to sometimes take an activist stance -- witness its pairing up with Carl Icahn to oppose Michael Dell and Silver Lake's $24.4 billion LBO for Dell Inc. -- a source familiar with the Saks situation said it was unlikely that the firm was directly behind a sale process.
Southeastern declined to comment on its investment.
Other major shareholders who have accumulated stakes in Saks, according to regulatory filings, include Diego Della Valle, the chairman of Tod's SpA, with nearly a 15.1% stake, as well as Italian bank Mediobanca Banca Di Credito Finanziario SpA, with about a 5.3% stake. Mexican tycoon Carlos Slim, through his company Inmobiliaria Carso SA de CV, has a 15.4% stake.
But one thing that could be motivating Saks is the potential buyout of rival Neiman Marcus Group Inc., which recently hired Credit Suisse Group to explore a dual-track initial public offering and sale.
As Neiman shops itself, Saks too, could be looking to take advantage of the available pool of buyers being generated.
And Saks has been considered a leveraged buyout target ever since Neiman Marcus was taken private in 2005 by private equity firms TPG Capital and Warburg Pincus LLC in a $4.7 billion deal.
The financial crisis squashed takeover speculation, but with the buyouts of J.Crew Group Inc. and Gymboree Corp., both in 2010, practically every retailer was thought to be a possible target.
While reports have Kohlberg Kravis Roberts & Co. LP weighing buyouts and a merger of Neiman and Saks, an industry analyst said such a move was unlikely.
Neiman and Saks have overlapping stores at a number of locations, so acquiring Saks to merge with Neiman Marcus would essentially be the equivalent of buying a competitor to shut it down, this analyst said.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV