This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Saks Soars on Report Goldman Sachs Hired for Buyout (Update 2)

This story has been update from yesterday with additional information.

NEW YORK ( TheStreet) - Saks (SKS) extended gains on Wednesday following reports that the luxury retailer has hired Goldman Sachs (GS) to explore a possible sale. A Bloomberg article is now suggesting that KKR (KKR) is considering investing in the New York-based retailer in order to pursue a merger with Neiman Marcus.

Shares were surging 16% to $15.84. The stock jumped 5% on Tuesday after quarterly store sales exceeded analyst estimates.

The owner of the illustrious Saks Fifth Avenue, whose flagship store in Manhattan could be worth more than $1 billion, analysts say, apparently hired Goldman Sachs in recent weeks, according to an article posted by the NY Post after the markets closed on Tuesday.

Buyers of the New York-based retailer could include large private equity firms, perhaps KKR and Leonard Green & Partners, the Post article said.

If such a combination were to occur, the merger would create an upscale department store chain with more than $7 billion in annual sales and second only to Nordstrom (JWN), the Bloomberg article says.

Neiman Marcus had also recently hired Credit Suisse to explore strategic options, the article says. the company has about 40 flagship stores and owns Bergdorf Goodman's two New York stores. Neiman Marcus is privately owned by TPG Capital and Warburg Pincus, Bloomberg says.

The company currently operates 42 Saks Fifth Avenue stores, 66 Saks Fifth Avenue OFF 5TH stores as well as its online e-commerce presence.

Saks spokeswoman Julia Bentley said it is against her company's policy to comment on rumors or speculation.

Deutsche Bank analysts Paul Trussell and Matt Siler say a sale is unlikely due to the company's high valuation; management that has "worked tirelessly" to get its balance sheet debt free and an aggressive operating strategy that includes closing underperforming stores and investing heavily in IT.

This is also the third occurrence of leverage buyout chatter for Saks since the fall of 2010.

That said, the analysts conclude that it could sell itself for roughly $16 to $19 a share.

Credit Suisse analyst Michael Exstein and Lauren Thompson suggest that the possibility of a sale may be "another indication that we are getting closer to a cyclical peak for some retail stocks."

"We are becoming more cautious on the group as the events unfold," the analysts said in a May 21 research note.

Credit Suisse rates Saks with a neutral rating.

"So far this reporting season, results have shown the negative relationship of inventories to sale growth for all companies other than Macy's. This has obvious implications for sustainability of gross margins and profit rates. It also marks one of the cyclical turning points for the group," they wrote.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

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.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,279.74 +13.75 0.08%
S&P 500 2,010.40 -0.96 -0.05%
NASDAQ 4,579.7890 -13.6380 -0.30%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs