PE and Clothing Stores


I am very interested in knowing your opinion on clothing store LBOs, like the Eddie Bauer one announced yesterday or the Burlington Coat deal by Bain.

What is the extraordinary value to be extracted out of these companies which are no clear leader of their segments and concepts. Is it purely a financial play? Or competition for targets too intense?

For your information: Eddie Bauer agreed to be acquired by affiliates of Sun Capital Partners and Golden Gate Capital,for roughly $614 million, including debt assumption of $328 million. The deal values Eddie Bauer shares at $9.25 each, a 12% premium over the stock’s average closing price for the prior four weeks. The stock closed Friday at $8.85, down 6.6%. Eddie Bauer sells casual sportswear and accessories for what it calls the “modern outdoor lifestyle.”

The company says its products are available at about 380 stores throughout the U.S. and Canada, through catalog sales and its websites. It also says that the acquisition is the result of a review of strategic alternatives begun in May 2006. “We believe that the transaction will provide Eddie Bauer with new resources and the time necessary to execute our turnaround strategy,” Chief Executive Fabian Mansson said in a statement. The deal is subject to shareholder approval and is expected to close in the first quarter of 2007.

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