Dubai government closer to Barneys buy

Jones Apparel's luxury clothing retailer is expected to fetch $825 million in a sale to investment firm Istithmar.

NEW YORK ( -- Jones Apparel Group is finalizing details of the sale of its high-end clothing retailer Barneys New York to a Dubai government investment group for approximately $825 million, according to published reports Thursday.

The deal with investment firm Istithmar is expected to close early next week, but New York Times sources warned that the talks could still collapse.

Proceeds from the sale, which are expected to be more than double the amount Jones paid for the luxury chain in 2004, are expected to go toward a stock buyback, investments in other brands or acquisitions in an attempt to revive the company, The Wall Street Journal reports.

The luxury clothing retailer has long been coveted by competitors and private equity groups. Investment firms Whippoorwill Associates and Bay Harbour Management took control of the company after it emerged from bankruptcy in 1999.

Peter Boneparth, CEO of the mid-priced clothing company Jones Apparel, surprised Wall Street by buying the high-end chain for $400 million.

Jones' stock has been stagnant following a downturn in the moderate apparel sector, which includes Jones' department-store brands such as Nine West, Gloria Vanderbilt and Jones New York.

Last year, Boneparth, a former investment banker, tried unsuccessfully to sell the the entire company to a private-equity firm.

The Barney's sale is expected to leave the company more vulnerable to to the problems of traditional department stores, like those under the Macy's (up $0.43 to $39.55, Charts), formerly Federated Department Stores, umbrella. Barneys has been Jones's top performing asset.

Shares of Jones Apparel (down $0.31 to $28.89, Charts, Fortune 500) were edging lower on New York Stock Exchange trading Thursday morning. Top of page