http://www.dallasnews.com/business/retail/20130909-dallas-based-neiman-marcus-sold-for-6-billion.ece
Neiman Marcus was founded in 1907. The company operates 41 Neiman Marcus stores, 2 Bergdorf Goodman locations, 36 Last Call stores and 6 Cusp Stores. Neiman Marcus also runs an upscale online retailing division under Neiman Marcus, Bergdorf Goodman, Last Call, and Horchow brands. On September 9, 2013 a Los Angeles private equity firm and Canada’s largest public pension fund announced that they are buying Neiman Marcus Group for $6 billion. The 2 parties hold an equal interest in the luxury retailer, and Neiman Marcus management led by CEO Karen Katz will retain minority stake. The final sale is expected to go through in the 4th quarter of this year. Customers will not see any change of this buyout when shopping in Neiman Marcus stores because there has not been a lot of press coverage on this story.
Fort Worth based TPG and New York based Warburg Pincus have owned Neiman Marcus since 2005 as part of a $5.1 billion leveraged buyout. The parties were entertaining private buyers while the company was proceeding with plans for an IPO. Through this sale, the 2 buyout firms have reported a %150 profit on their combined $1.2 billion initial investment in Neiman Marcus. The parties are expected to receive about $2.75 billion in the sale on top of $400 million they got last year from a one- time dividend. Part of the purchase price will be used to repay about $2.7 billion debt.
Neiman Marcus has been operating with a high debt-equity ratio. After 8 years of being owned by private equity firms, the business is used to operating with a reasonable amount of debt because the company has a lot of long-term investors who are not as concerned with quarter to quarter performance as with companies who publicly trade stock. Neiman Marcus’s new owners are expected to inject some capital into the business.
Finally, the article discusses how luxury retail is a challenging business because the business has to make a very select group of people happy. While Neiman Marcus has done very well with its online business it still needs showrooms to maximize their distribution and reach more shoppers.