Saks Inc. to Spin Off Signature Fifth Avenue Store

In a bid to stimulate its earnings and stock price, Saks Inc.(SKS Quote) said Wednesday that it plans to spin off its Saks Fifth Avenue, Saks Direct and Saks Off 5th operations into a distinct, publicly traded company.

The newly formed company, which will be known as Saks Fifth Avenue Enterprises, will have its headquarters at the Saks Fifth Avenue offices in New York City.

Meanwhile, Saks Inc., which will be renamed, will remain based in Birmingham, Ala., and continue to operate its remaining department store chains.

After looking at the size and growth potential of each business, Saks, the luxury department store enterprise, concluded that two groups would perform more efficiently than one, according to R. Brad Martin, chairman and chief executive of Saks.

"Over the past 18 months, we have witnessed a general contraction of department store-valuation multiples," Martin said in the statement. "Our share price has been additionally discounted because of the failure to achieve our targeted earnings growth."

Shares of Saks closed Wednesday at 12 1/2 up 11/16, or 5.8%. But the stock, which traded as high as 27 1/8 this year, has dropped gradually in recent months.

After the deal is completed, Saks will retain the following companies: Proffitt's, McRae's, Younkers, Parisian, Herberger's, Carson Pirie Scott, Bergner's and Boston Store department stores.

Under the transaction, which the company expects to finish in November, each Saks shareholder will receive one share of Saks Fifth Avenue Enterprises stock for every three shares of Saks common stock.

Fractional shares will be paid in cash, the company said, and shareholders will keep their shares of Saks.

The chief executive, Martin, also said the deal would result in "minimal negative synergies" of about $10 million, but would help to "unlock the intrinsic value of Saks."