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Reuters

The owners of Neiman Marcus agreed to sell the US luxury department store chain to two private investors for US$6 billion, almost US$1 billion more than they paid for the company in 2005.
The buyers, Ares Management and the Canada Pension Plan Investment Board (CPPIB), said on Monday they will split ownership equally, with an undisclosed minority stake going to current management.
The deal keeps the company in private hands after a long search for a buyer by current ownership, led by private equity firms TPG Capital and Warburg Pincus. They had also explored a possible IPO for Neiman, which they took private in 2005 for US$5.1 billion.
The Dallas-based retailer operates 41 namesake department stores along with the famed Bergdorf Goodman store on Manhattan’s Fifth Avenue and the Last Call outlet chain.
The deal suggests that some investors see a possible revival in the luxury retail segment. In July, Hudson Bay Co bought Saks Fifth Avenue, another storied US retailer.
The parties said they expected the deal to close in the fourth quarter.
“If you look at where we are in the cycle, it’s a good time to buy this business,” said Andre Bourbonnais, senior vice president of private investments at CPPIB, one of Canada’s largest public pension funds and a global dealmaker whose assets including shopping malls, real estate and infrastructure.
“People feel more and more confident about the recovery in the US and the sustainability of that recovery.”
Bourbonnais praised Neiman’s management team and said the retailer would continue on a “business as usual” track, focused on strengthening its online retail business and looking for opportunities to expand the brand geographically.
“There are no immediate plans” to expand in Canada, he said. But Neiman would keep studying “when it’s advisable to come to Canada.”
High-end US retailer Nordstrom said last year it would open its first four Canadian stores in the fall of next year.
David Kaplan, co-head of Ares’ private equity group, said in a statement that the firm shared Neiman’s vision and praised the retailer’s chief executive officer, Karen Katz.
Los Angeles-based Ares, with about US$66 billion in capital under management, is primarily a debt-focused investment firm which also engages in corporate buyouts.
Neiman has largely stopped opening new department stores, but has focused its attention on e-commerce and the expansion of the Last Call chain.
Bourbonnais said the fund was drawn in part by the expectation of an increase in US luxury spending. The pension fund also has holdings at the other end of the market, dollar stores, part of what it calls a “barbell” strategy.
In 2008, Neiman’s revenue plummeted because of the financial crisis, but it returned to pre-crisis levels this year. It rose 6.5 per cent to US$4.5 billion in the 12 months ended April 27, the company said in July, when it filed for an initial public offering.
Neiman registered for the IPO after talks with potential buyers, including sovereign wealth funds, failed to generate the price its owners sought, people familiar with the matter told Reuters at the time. Private equity investors prefer a private sale to an IPO, since they only sell part of their stake in an IPO while the private sale allows a full exit.
The buyers did not disclose how much debt they assumed in the deal, but said Warburg and TPG would pay off some of Neiman’s debt, which totaled US$2.7 billion April 27, the date of its latest earnings report.
The sale comes just weeks after storied US luxury department store Saks agreed in July to be sold to Hudson’s Bay Co for US$2.4 billion.


Neiman Marcus sold for US$6b to Canada Pension Plan, Ares

Revenue at Neiman Marcus plummeted in 2008, but it returned to pre-crisis levels this year. Photo: AFP

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