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Neiman Marcus in $5.1B buyout
Private equity groups Texas Pacific Group and Warburg Pincus win bid for luxury retailer.
May 2, 2005: 1:34 PM EDT
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NEW YORK (CNN/Money) - High-end retailer Neiman Marcus announced Monday that it has agreed to sell the company to a pair of private equity firms, Texas Pacific Group and Warburg Pincus LLC., for $5.1 billion.

Under the terms of the agreement, Texas Pacific Group and Warburg Pincus will acquire all of the outstanding Class A and Class B shares of The Neiman Marcus Group (Research) for $100 a share in cash.

Neiman Marcus shares rose 12 cents to $98.32 on Friday.

According to the deal, each of the investors will own equal stakes in the company upon completion of the transaction.

The sale, which is subject to regulatory approval and approval by the company's shareholders, is expected to be completed by Nov. 1.

The Dallas-based purveyor of luxury goods operates 35 namesake stores in 20 states as well as two Bergdorf Goodman stores in New York City. The company's Neiman Marcus Direct unit operates a mail-order business that distributes catalogs featuring apparel, home furnishings and gourmet food.

The Neiman Marcus sale is the latest in a quick succession of retail mergers & acquisitions to have hit Wall Street in the past few months.

The eruption of activity garnered attention this year when two of the nation's oldest retailers joined forces as Kmart acquired Sears for $11 billion.

Then Federated (Research), owner of Macy's and Bloomingdale's, inked an $11 billion deal in March to buy rival May Department Stores (Research) and a group of investors agreed to buy Toys "R" Us (Research) for about $6.6 billion.

However, industry watchers say the Neiman Marcus sale is unlike these other deals in which the participants were retailers struggling to grow sales and market share.

"Neiman Marcus is selling itself at its peak," said Marshal Cohen, chief retail analyst with market research firm NPD Group. "There was nothing wrong with the company. Neiman Marcus was the retailer of 2004 with strong sales and customer loyalty, and it should continue that momentum."

"We're only in chapter one of a five-chapter story," said Cohen. "This is about recognizing that there is a tremendous amount of capital out there. In effect, what it also shows is that any retailer could be in play today because retail value today is at its premium."

Next among them may be Neiman Marcus' rival Saks (Research), which announced last week that it would sell two regional department store chains for $622 million to Belk Inc.

What does the changing retail landscape mean for consumers?

Said Cohen,"Consumers will have to learn how to shop in a new environment. I think stores will begin to develop their own unique personality again."

Investment banking firms Goldman Sachs and J.P. Morgan advised The Neiman Marcus Group on the takeover deal.

Click here to read more about the Darwinian world of retailing.

Click here to read more about concerns that luxury may be heading for a cooldown.

Click here for more on the $11 billion Federated-May deal.

Click here for more on the $11 billion Kmart-Sears deal.  Top of page

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