Neiman Marcus Agrees to Sale; Two Investment Firms to Pay $5.1 Billion

Dallas-based cataloger/retailer The Neiman Marcus Group (NYSE: NMG.A) on May 2 agreed to be acquired by Texas Pacific Group and c for $100 per share in cash, or $5.1 billion. Texas Pacific and Warburg Pincus will own an equal stake in the company upon the transaction’s close, which is expected to be Nov. 1.

Neiman Marcus, which on March 16 had announced it retained Goldman Sachs to explore strategic alternatives, operates the Neiman Marcus and Bergdorf Goodman upscale department stores and Horchow gifts catalog. The company’s direct marketing segment includes the print catalog and online operations of Neiman Marcus and Horchow, and the Bergdorf Goodman Website.

It’s expected that the new owners will keep existing Neiman Marcus management intact and run the business as a stand-alone entity, says Owen Blicksilver, company spokesperson for Fort Worth, TX, and San Francisco based Texas Pacific Group. Neiman’s unique status and its tremendous following were attractive to the equity investor, he says. What’s more, Blicksilver adds, Neiman’s “demographics support future sales growth.”

Neiman Marcus, whose fiscal year ends July 31, reported total company revenue of $3.5 billion for 2004, compared with $3.1 billion the previous year. Neiman Marcus Direct totaled sales of $571 million, compared with $493 million last year. Neiman also has majority stakes in accessories-maker Kate Spade and Gurwitch Products, which manufactures Laura Mercier cosmetics.

Craig Battle, managing director for Princeton, NJ-based investment bank Tucker Alexander, says the transaction goes beyond the catalog world. “It speaks to the consolidation of the major retailers. The private equity guys love Neiman Marcus because its high-end brand with cache,” he says. The deal itself “is more evidence that investing is back in the retail and direct to consumer marketplace,” Battle says.

It’s no surprise that the private equity players are going after the larger public companies,” says Mal Appelbaum, president of New York–based financial consultancy Appletree Advisors. “In the move to raise larger and larger investment funds, the private equity players have to do larger deals. It’s a continuation of an overall market trend.” We’ll continue to see more of these “club deals” where two or more private equity players team up on a deal to acquire a business, says Appelbaum. For instance, a trio of private equity firms acquired gifts and gadgets Nashua, NH-based cataloger/retailer Brookstone on April 15.

Texas Pacific Group, which is perhaps best known for owning New York-based apparel cataloger/retailer J. Crew, manages more than $15 billion in assets across a range of industries, including investments in Petco, Debenhams, Burger King, Ducati, and Continental Airlines.

Warburg Pincus has approximately $13 billion under management and invests in a range of industries including information and communication technologies, financial services, healthcare, leveraged buy outs, and special situations, media and business services, energy, and real estate.

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