Neiman Marcus Is Sold

Two private investors will pay $100 a share for the luxury retailer.
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Luxury retailer

Neiman Marcus

(NMG.A)

agreed to be taken private by a pair of investors for $5.1 billion, or $100 a share.

Texas Pacific Group and Warburg Pincus will acquire the outstanding Class A and Class B shares of Neiman Marcus Group for cash, giving the firms equal stakes in the company. The deal, widely anticipated on Wall Street, ends an auction process whose other bidders reportedly included

Vornado Realty

(VNO) - Get Report

,

Kohlberg Kravis Roberts

,

Bain Capital

,

Thomas H. Lee Partners

and

The Blackstone Group

.

While the price tag offers a slight premium to Neiman's closing price last Friday of $98.32, it's lower than some of the forecasts made last week, which had gone as high as $113. Signs of weakness in the retail sector and the broader economy may have driven the price down in the end.

The stock fell $5.55, or 5.6%, to $92.77 Monday.

Shares of Neiman Marcus have soared over 37% so far this year amid reports of the impending sale. They danced above the $100-mark last Wednesday, reaching an all-time high before dropping to Friday's closing price.

The deal marks yet another acquisition in a flurry of consolidation in the retail sector, in which private investment groups have had a prominent role. However, unlike previous deals, which have involved struggling chains with competitive issues, Neiman Marcus is a retailer that many observers say is at the top of its game amid particular strength in high-end, luxury spending.

"The question is, 'Where is Neiman Marcus in the cycle?'" said Howard Davidowitz, chairman of Davidowitz & Associates, a New York retail consulting and investment banking firm. "Judging from the declines in their same-store sales this year, it looks to me like they're at the very top of the cycle, and that's a bad time for these guys to buy the company."

"We are very pleased with the results of our strategic review," said Neiman Marcus Chairman Richard A. Smith in a statement. "This transaction provides outstanding shareholder value and represents an endorsement of the excellent performance of our entire team."

Smith and his family, which owns a significant percentage of the equity of the company, have separately agreed to vote their shares in favor of the merger.

Completion of the deal is contingent on regulatory review and approval by the shareholders of Neiman Marcus. It's expected to occur by Nov. 1, 2005.

Burt Tansky, Neiman's president and chief executive, said, "We are excited to announce this transaction, particularly given the strengths of Texas Pacific Group and Warburg Pincus. They share our interest in the strong future of our company. Our customers, employees and vendors should know that now, and following the completion of this transaction, it will be business as usual. We believe that our new partners will help us continue to focus on a business plan that is dedicated to luxury leadership, financial discipline, quality and growth."

For their part, both buyers expressed enthusiasm about working with Tansky and the rest of the existing management team.

"Neiman Marcus is the leading luxury retailer, and we believe strongly in the continued growth of the company," said Warburg Pincus Managing Director Kewsong Lee.