NEW YORK (TheStreet) - Shares of Lululemon Athletica (LULU) were rising Thursday after The Wall Street Journal reported that founder Dennis "Chip" Wilson was talking to private equity firms about taking the yoga apparel maker private. Firms that Wilson had reportedly been talking to included Leonard Green & Partners, the newspaper reported.
No deal had been reached yet but as the Journal points out, Wilson is "actively exploring options as he seeks to exert more influence over how Lululemon is run." Lululemon jumped as much as 5.6%. The shares have lost 28% this year.
A deal to take the Vancouver-based company private, however, would be expensive, considering that investors would expect a premium to its $7.5 billion market capitalization. As TheStreet's sister site The Deal has emphasized, private equity firms tend to steer away from companies that trade much above 7 times Ebitda, particularly in the cyclical world of retail.
Lululemon, was trading at about 12.5 times the $420 million in Ebitda projected for its current fiscal year, The Deal article states, which ran on June 24. "The higher the multiple, the more equity a PE firm or firms have to sink into a deal, and the riskier the investment becomes," the article said.
As of Thursday, Lululemon had a market cap of $6.3 billion.