Neiman Marcus sells for $6 billion to consortium
Neiman Marcus deal will mean fresh injection of capital, say Ares Management and Canadian Pension Plan Investment Board, who are paying $6 billion to acquire the chain. Neiman Marcus sells luxury items to a wealthy clientele that it showers with personal attention.
Luxury merchant Neiman Marcus is getting a new owner.Skip to next paragraph
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Ares Management and Canadian Pension Plan Investment Board announced Monday they are buying the luxury chain Neiman Marcus for $6 billion. The two new owners will hold an equal economic interest in Neiman Marcus, and the company's management will retain a minority stake.
"We plan on investing meaningful capital into the business to ensure Neiman's long-term position as the unparalleled leader in luxury retail," said David Kaplan, senior partner and co-head of the private equity group of Ares, based in Los Angeles.
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The deal, which is expected to be finalized in the fourth quarter, would end control of the luxury retailer by private equity firms TPG Capital and Warburg Pincus. They bought the company for $5.1 billion in 2005 during the booming luxury years when affluent shoppers scooped up $5,000 handbags with abandon and then held onto it during the depths of the recession and recovery period.
But while overall luxury sales have rebounded, that over-the-top spending has lost its froth. In fact, the luxury market is showing signs of a slowdown. Consulting firm Bain & Co. predicts luxury sales will be up 5 percent to 7 percent in the Americas this year, down from 13 percent in 2012
Analysts say that the two equity firms had wanted to get out of Neiman Marcus after holding on to it for eight years. Equity firms typically own an investment for anywhere from three to five years, says Mark Cohen, a business professor at the Columbia Business School and the former CEO of Sears Canada.
"I think they were itching to get out," Cohen says. "They would have exited sooner if not for the onset of the recession."
In June, the equity firms that currently own Neiman Marcus filed a plan for the Dallas-based company to go public while at the same time searching for a buyer. The new deal likely ends the retailer's opportunity to go public. Michael Appel, who runs a retail consultancy called Appel Associates, said the old owners probably decided to sell the business outright instead of dealing with an IPO market that has been choppy.