Neiman Marcus Inc., the Dallas-based luxury chain, agreed to sell itself to Ares Management LLC and the Canada Pension Plan Investment Board for $6 billion.
Ares and the pension fund will hold an equal economic interest in Neiman, and the chain’s management will retain a minority stake, the buyers said in a statement today. The deal probably ends prospects for a Neiman initial public offering.
Neiman’s private-equity owners TPG Capital and Warburg Pincus LLC paid about $5.1 billion for the Dallas-based retailer in 2005. Neiman’s sales haven’t returned to the level seen before the 2008 financial crisis as luxury shoppers have been slow to return to stores.
“Neiman is an excellent brand and an excellent company,” Michael Appel, founder of Appel Associates LLC, a retail consultancy, said in a phone interview yesterday. “The question is what can the buyers do with it? Hope springs eternal. Perhaps they feel that their management and their ability to work with companies will get them the return they are looking for.”
Revenue at Neiman rose 8.6 percent to $4.35 billion in the fiscal year ended July 28 2012. The company runs 41 stores under the same name across the U.S. and two Bergdorf Goodman department stores on New York City’s Fifth Avenue.
Luxury spending in the Americas grew 5 percent on a constant-currency basis in 2012, less than half the 13 percent gain of the previous year, according to Bain & Co. estimates.
The Neiman sale is the second deal in the luxury retail industry in recent months. Hudson’s Bay Co. agreed to buy Saks Inc. for $2.4 billion in July, combining Canada’s largest-department store chain with one of the most prestigious U.S. luxury retailers in a deal that may spur the creation of a real estate investment trust. The transaction, which brings together the Lord & Taylor and Saks Fifth Avenue brands, creates a company that will operate 320 stores.
The deals come at time when the U.S. retail sector has cooled as some consumers have switched their spending to bigger items including cars, homes and home furnishings. The chains that sell apparel and other discretionary goods have suffered, including Nordstrom Inc. and Macy’s Inc., which reported second-quarter sales that trailed analyst estimates.
“It is a difficult environment for luxury companies these days because we’ve seen fewer foreign visitors and the domestic shopper is cutting back because of the uncertain environment,” Walter Loeb, president of Loeb Associates, a New York-based retail consulting firm, said in a phone interview today.
The poor climate may have persuaded Warburg and TPG to go for an outright sale rather than an IPO, Appel said. Neiman filed an IPO registration in June.
Neiman Marcus was founded in Dallas by Herbert Marcus, his sister and her husband A.L. Neiman in 1907. Marcus bought out the Neimans in 1928 and his son Stanley ran the stores from 1952 to 1979. Stanley’s son Richard then became chief executive until 1988, when he resigned, ending 81 years of family management of the chain.
The chain is known for its Christmas catalog, which offers such gifts as limited-edition McLaren cars for $354,000.
Chief Executive Officer Karen Katz has been working to spur sales growth by introducing the chain’s Cusp contemporary fashion concept into its namesake stores to attract younger customers, opening an e-commerce site in China, and rolling out more Last Call outlets.
Katz will remain CEO, Ginger Reeder, a spokeswoman, said in an e-mail. She didn’t provide details of the management minority stake.
Los Angeles-based Ares has invested in Smart & Final Stores Corp., Floor & Décor Outlets of America Inc., and 99 Cents Only Stores, its website says.
Credit Suisse was Neiman’s financial adviser, while RBC Capital Markets and Deutsche Bank Securities Inc. represented Ares and CPPIB. The three firms provided debt financing. Neiman’s legal counsel was Cleary Gottlieb Steen & Hamilton LLP. Proskauer Rose LLP was transaction counsel and Latham & Watkins LLP was finance counsel to the buyers.