Abercrombie & Fitch is a very likely target for an LBO, according to a report from Bloomberg News.
Abercrombie could get bids of $70 a share, the story says, citing Cowen & Co. The company trades at 4.4x EBITDA estimates through 2015, which is less than its competitors, Bloomberg says. Abercrombie has nearly $600 million in cash and little debt, according to the report.
In February, Abercrombie reported that fourth quarter profit tumbled nearly 79% to $19.6 million, or 22 cents a share, for the time period ended Jan. 28, from $92.6 million, or $1.03 a share, in 2011. Comparable store sales were flat. For the 52-weeks ended Jan. 28, profit fell 15% to $127.7 million, or $1.43 a share.
Abercrombie was more positive for 2012 and expects earnings of $3.50 to $3.75 a share. The company has a market cap of $4.46 billion. Takeover speculation has caused shares of the teen retailer to rebound over the past month. The stock hit a low of about $40 a share in February and has since surge to over $50 a share. Shares on Tuesday rose 39 cents to $52.52 in mid-day trading.
The retailer, known for its provocative ads, competes against American Eagle Outfitters and Aeropostale. Abercrombie is expected to produce cash from operations, excluding capital expenses, of $224 million this fiscal year, Bloomberg says.
The most likely bidders for Abercrombie? The story, citing Morningstar, mentioned TPG Capital and Leonard Green. That’s pretty logical. Last year, TPG and Leonard Green completed their buy of J. Crew, the preppy retailer, for $43.50 a share.