Golden Gate, Sun Capital Acquire Eddie Bauer

On Nov. 13, Golden Gate Capital and Sun Capital agreed to buy Redmond, WA-based cataloger/retailer Eddie Bauer for $614 million, including $328 million in debt. The acquisition is expected to close in the first quarter of 2007 and is subject to the approval of Eddie Bauer stockholders and other customary closing conditions, including Hart-Scott-Rodino antitrust review.

The deal comes just days after Golden Gate’s announcement on Nov. 10 that it was acquiring Venus Swimwear, the parent company of the Venus and WinterSilks catalogs. (See Venus, WinterSilks Join the Golden Gate Family.)

Once the deal closes, Eddie Bauer will once again share a parent company with the Spiegel and Newport News catalogs. Spiegel Group, the former parent company of the titles, had filed for bankruptcy protection in March 2003. Golden Gate subsequently bought Newport News and the Spiegel catalog in the summer of 2004.

According to David Solomon, managing director for New York-based Goldsmith Agio Helms, the EBITDA for the trailing 12 months as of Sept. 30 was $56.1 million, which represents a 10.9 multiple.

“That’s a good full price for a company that’s had some trouble,” Solomon says, “but it pales in comparison to the prices paid for J. Jill [19.3 times] and Sportsman’s Guide [12.8 times].”

The deal represents a 12% premium over Eddie Bauer’s average price per share of $9.25 over the past four weeks, “but that’s not much of a premium,” Solomon notes.

It’s important to note that with the Eddie Bauer deal, unlike its previous catalog-related acquisitions, Golden Gate is working with a partner: Boca Raton, FL-based Sun Capital, which also owns Lillian Vernon Corp. Both Sun deals were led by Sun Capital managing director Gary Talarico. Also significant is that the deal marks the first in Golden Gate’s arsenal that has a considerable amount of stores.

A source familiar with Golden Gate who asked not to be identified notes that the women’s apparel market “is a very tough segment and has been many for many years, and many [direct marketers] are underperforming because they don’t have the a scale to compete with retailers. But [Golden Gate] managing director Stefan Kalusny has come in and bought companies using best practices and leveraging names and lists and helping the underperformers perform, and that’s a powerful engine.”

“This points to its continuing consolidation” within the apparel catalog industry, agrees Stuart Rose, managing director of Wellesley, MA-based investment bank Tully & Holland. “As database management continues to become increasingly sophisticated, more entities will use ‘in-house co-ops’ to mine for new customers and increased revenues. The catalog consolidators are learning how to leverage the assets—customers–of one division into another one.”

Goldman Sachs & Co. served as Eddie Bauer’s financial adviser in connection with the deal. The company noted that Goldman Sachs & Co. and William Blair & Co. each rendered separate fairness opinions to its board, from a financial point of view, of the consideration to be received by Eddie Bauer’s stockholders in the merger.

Related stories:

Haband Bought by Golden Gate

Golden Gate Gobbles Another

Norm Thompson Sold to Catalog Holdings

Spiegel Parent Buys Appleseed’s and Draper’s & Damon’s

Spiegel Update: New Owner, Old Management

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