Here’s what Express Inc. would look like strutting in J. Crew Group Inc.’s buyout shoes.
Express, the clothing retailer targeting shoppers in their 20s, would be valued at $23 to $27 a share in a sale based on similar retail buyouts in recent history. That implies a premium of at least 67 percent.
Private-equity firm Sycamore Partners, which took Hot Topic Inc. private last year, said yesterday that it’s interested in acquiring the 90.1 percent of Express that it doesn’t already own. The company had a market value of $1.14 billion as of yesterday and a $51 million net cash position as of last month.
Buyers of U.S. clothing retailers in the past five years paid a median valuation of 9.3 times trailing 12-month earnings before interest, taxes, depreciation and amortization, according to data compiled by Bloomberg based on transactions larger than $500 million. That multiple would result in a takeover price of about $27 a share for Columbus, Ohio-based Express, giving it an enterprise value of $2.2 billion including Sycamore’s stake.
Comparable transactions include the Hot Topic buyout, as well as deals for J. Crew Group Inc., Rue21 Inc. and Charming Shoppes Inc.
The apparel chains were sold at a median 13 percent discount to trailing 12-month sales, data compiled by Bloomberg show. That suggests a slightly lower offer of about $23 a share for Express.
Express’s stock rose 20 percent to $16.32 as of 12:41 p.m. New York time today, signaling investors expect to get bought out for at least that much.
A deal at $23 a share would be a 67 percent premium to its average price in the 20 trading days through yesterday. On average, analysts estimate the shares will trade for only about $16 apiece in a year if the company isn’t acquired, data compiled by Bloomberg show.
Leveraged buyouts have lost their popularity in the past year as U.S. stock indexes reached records. A Bloomberg News analysis found that public-to-private LBOs were just 6 percent of all U.S. private-equity deals this year through April, compared with an average of 50 percent over 10 years.