Furniture Brands takeover seen unlikely

ATLANTA (Reuters) - A deal to acquire Furniture Brands International Inc (FBN.N) is unlikely and "unwise" from a buyer's perspective, given tighter credit standards and weakening company performance, brokerage firm Morgan Keegan said on Thursday.

Private equity firm Sun Capital Securities said in February that it wanted to buy the maker of Broyhill, Thomasville and Lane furniture brands. Furniture Brands responded that Sun Capital's unsolicited interest included no offer price and gave its board no meaningful basis upon which to evaluate it.

"We are skeptical of any imminent deal by Sun Capital or any other entity" to buy Furniture Brands, Morgan Keegan analyst Laura Champine said in a research note on Thursday.

"Based on our projections, an acquirer paying any type of premium to yesterday's closing price of $11.63 would be paying a ridiculous EBITDA multiple for a declining business model," Champine added.

She also noted that Furniture Brands had a poison pill, or a defensive mechanism, that it could use to fend off takeovers.

The St. Louis company is closing stores, consolidating distribution operations and taking other steps to turn around its business as the U.S. housing slowdown hurts furniture sales. It reported a fourth-quarter loss in late January.

Champine also said that Sun Capital, which has disclosed a 9.4 percent ownership stake in Furniture Brands, has watched investments in Wickes Furniture, Sharper Image and Lillian Vernon suffer as those retailers filed for bankruptcy protection.

"We believe its portfolio may already be highly leveraged to the retail industry and consumer spending during a challenging macroeconomic period," Champine wrote.

Champine also said checks by her firm indicated that Broyhill, a brand that has been pressured over the past year, was being "highly promoted and discounted as much as 50 percent" at Big Lots Inc (BIG.N), which specializes in sales of excess inventory.

"This does not seem to coincide with the company's strategic initiatives to focus on building the brands and collecting a brand premium in the marketplace," Champine added.

Furniture Brands shares were up 8 cents to $11.71 in New York Stock Exchange morning trading. The stock is up 70 percent from a year low of $6.82 in January but is down about 30 percent from a high of $16.56 in April 2007.

(Reporting by Karen Jacobs; Editing by Dave Zimmerman)