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Pier 1 Set to Undock

The CEO's departure and interest from Europe signal that a sale may be near.
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With its leader planning his retirement,

Pier 1 Imports

(PIR) - Get n.a. Report

is rolling out the red carpet for a takeover.

Shares of the bedraggled home furnishings chain recently were trading up 44 cents, or 5.9%, to $7.86 on news that the company's longtime chairman and CEO, Martin Girouard, will retire in February. Investors who have endured his futile attempts to revive the business are pleased to see him go, but more importantly, Girouard's absence sets up a vacancy that could be filled by a buyer looking for cheap assets.

Such a buyer, Jakup a Dul Jacobsen, has

shown interest in a "possible negotiated transaction," and Piper Jaffrey analyst Neely Tamminga estimates that a purchaser could end up paying $9 to $11 a share for Pier 1.

In a recent filing with the

Securities and Exchange Commission

, Pier 1 said it will make "information available to

Jacobsen's firm, Lagerinn ehf concerning the business, financial condition, operations, assets and liabilities."

The announcement signaled that Jacobsen, who has been lurking at Pier 1 since last February, when he disclosed owning a 10% stake in the company, is moving in for the kill. Pier 1 has been particularly vulnerable since its brand-repositioning campaign that was launched last spring -- it's last gasp for air -- was met with continued sales declines. Jacobsen's most recent overtures finally forced Girouard to read the writing on the wall.

"I feel that it is time for me to leave in the course of a normal retirement and allow new leadership to emerge and flourish," said Girouard in a statement released over the weekend.

That's not what Girouard was telling analysts in mid-June after the company reported a first-quarter loss that was nearly double last year's and warned of a steep decline in sales. On a conference call, one analyst asked him if he would consider stepping down, and Girouard said he would not.

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"I don't think that me or the board believes that there is any group better right now than the group we have" to run the company," he said. "Obviously if we felt that there were better people to run certain areas of the company or even my job -- certainly we'd consider that, and we will in the future."

Tamminga wrote in a note to clients Monday that she had interpreted Girouard's comments from June as a clear signal that he would stick with the retailer for at least another year, but four months later, the future is now. Pier 1's board has hired executive-recruitment firm Herbert Mines Associates to find Girouard's successor.

Meanwhile, Jacobsen, whose investment in Pier 1 has supported the stock since it was disclosed earlier this year, may be looking for a cheap way to expand his retail empire to the vibrant consumer market in the U.S. The European retail magnate franchises Jysk (pronounced yoo-sk) stores, a home furnishings chain that's known as the Danish version of IKEA. Jacobsen's chain has 1,000 stores worldwide, with 23 stores in Canada and two in New Jersey under the name Inspiration.

He previously disclosed a stake in

Linens 'n Things

before it agreed to be acquired by a private equity group. Earlier this year, he struck a deal with Pier 1 to buy its U.K.-based Pier Retail Group for $15 million through a subsidiary.

Even with Monday's gains, shares of Pier 1 are down 27% for the year as its sales and earnings have collapsed under competitive pressure from the likes of

Target

(TGT) - Get Target Corporation Report

and

Wal-Mart

(WMT) - Get Walmart Inc. Report

.

The company has an aggressive marketing campaign planned for the fall and holiday selling season, but UBS analyst Brian Nagel said in a research note that recent events suggest the company is considering more dramatic steps, including a sale of the company. Still, Nagel is not recommending the shares, which have climbed 21% since the beginning of September.

"Shares have traded up lately, and the downside potential should a successful turnaround/takeout not occur remains too significant, in our opinion," Nagel said.