Bean to Make a Bid for Bauer?

In a move that would create a $2.5 billion casual apparel and home goods catalog/retail powerhouse, Freeport, ME-based L.L. Bean is considering purchasing Redmond, WA-based rival Eddie Bauer. But as of mid-May, it had done little to formalize its consideration.

Acquiring Eddie Bauer would more than double the $1.14 billion L.L. Bean’s sales and instantly give the cataloger a substantial retail presence nationwide. The $1.4 billion Eddie Bauer is part of Downers Grove, IL-based Spiegel Group, which also mails the Newport News and Spiegel catalogs. Spiegel filed for Chapter 11 bankruptcy protection on March 17.

“We notified the bankruptcy trustee through our Fleet Bank representative about our interest to be kept informed and learning more about the assets that might be sold,” says L.L. Bean spokesperson Rich Donaldson.

A formidable catalog and Web competitor to Bean, Eddie Bauer also operates 535 stores. Bean has four stores in Maine, Virginia, Maryland, and New Jersey, as well as 15 factory outlet stores. Bean also operates stores in Japan, Canada, and Germany.

While he won’t comment specifically on how an Eddie Bauer acquisition would fit in retail-wise, Donaldson does say that “retail is one of the growth horizons we are looking into.” He also notes that it’s early in the process, and that Bean for now is simply staying abreast of how the unit comes through the bankruptcy process. “It’s fair to characterize our interest as a curiosity,” Donaldson says.

As far as Spiegel is concerned, however, there’s nothing to be curious about. “We are not in discussions with L.L. Bean — or anyone else for that matter,” says spokesperson Debbie Koopman. “Our focus is on streamlining our operations and getting through the reorganization process.”

And streamlining it is: On May 5, the Spiegel Group announced that it would cut 635 jobs. Roughly 90 employees were let go from its corporate information services unit, which provides systems support to all operations. Spiegel also plans to close its Bothell, WA, fulfillment center, which employs 365 people, in July. And Eddie Bauer in May laid off 180 workers at its Redmond, WA, headquarters.

On the upside, Spiegel has received final bankruptcy court approval for the full amount of its $400 million senior secured debtor-in-possession (DIP) financing facility. The financing has been arranged by a consortium of banks, including Bank of America N.A., Fleet Retail Finance, and the CIT Group/Business Credit.

A MATCH MADE IN HEAVEN

But if a merger between Bean and Bauer does come to pass, industry watchers agree that it would be a good fit. “You put L.L. Bean in a true national retail chain and I think it could do extremely well,” says Walter Bernheimer II, president of Wellesley, MA-based consulting firm Bernheimer Associates and a former consultant to Bean. “Mention Bean anywhere and people have a positive reaction from its great brand image. And if Bean were to convert some of the Bauer stores to Bean while eliminating the weaker Bauer stores, it would be a hell of a way to build a national retail presence quickly.”

One reason there will be significant interest in Eddie Bauer coming out of this bankruptcy proceeding “is you can buy a store brand name at a reasonable price, free of liabilities,” says Matthew Caras, a principal with Leaders, a Portland, ME-based investment banking firm. “I don’t think this will be a distress type of sale. I assume the name is of principal importance to L.L. Bean despite the overlap of the two.”

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