Pier 1 stock rises after Cost Plus bid dropped

ATLANTA (Reuters) - Shares of Pier 1 Imports Inc (PIR.N: Quote, Profile, Research, Stock Buzz) rose 20 percent on Wednesday, a day after the home furnishings retailer withdrew its highly criticized proposal to buy smaller rival Cost Plus Inc (CPWM.O: Quote, Profile, Research, Stock Buzz).

"Management can now begin to move from defending an ill-timed and ill-orchestrated action to continuing to focus on its turnaround," Raymond James analyst Budd Bugatch said in a research note. "More importantly, it can begin rebuilding its credibility that was unfortunately damaged by this affair."

Pier 1's $88.4 million all-stock bid, unveiled on June 9, was assailed by analysts who said it would distract Pier 1 as it was seeking to right its own business. The operator of Cost Plus World Markets rejected Pier 1's proposal, saying it was not attractive financially or strategically.

Since revealing its bid, Pier 1's stock dropped 23 percent through Tuesday.

In dropping the offer late Tuesday, Pier 1 said that while it felt the combination would create a stronger company, it was unlikely that it would be able to acquire a majority interest in Cost Plus at a price that would make sense for Pier 1 shareholders.

Pier 1 also added that its turnaround is on track.

Shares of the company were up 81 cents, or 20 percent, to $4.84 in morning trading on the New York Stock Exchange. Cost Plus shares were down 15 cents, or 5 percent, at $2.87 on the Nasdaq.

(Reporting by Karen Jacobs; Editing by Steve Orlofsky)