By Greg Roumeliotis
NEW YORK, Sept 8 A consortium of Ares Management
LLC and the Canada Pension Plan Investment Board is in advanced
talks to acquire upscale U.S. retailer Neiman Marcus Inc from
TPG Capital LP, Warburg Pincus LLC and Leonard Green Partners
LP, two people familiar with the matter said on Sunday.
A deal for Neiman Marcus could be announced as early as this
week and would mean that the company would not proceed with its
plans for an initial public offering, the people said, asking
not to be identified as the negotiations are confidential.
One of the people said the deal would likely value Neiman
Marcus at around $6 billion, but cautioned that negotiations had
not been finalized and that talks could still fall apart.
Neiman Marcus, Ares, TPG, Warburg Pincus and the Canada
Pension Plan Investment Board declined to comment. A Leonard
Green spokeswoman did not respond to requests for comment.
Neiman registered for an IPO in July after earlier talks
with potential buyers, including sovereign wealth funds, failed
to meet the price expectations of its private equity owners,
people familiar with the matter told Reuters at the time.
The decision to pursue a sale to other private equity firms
could underscore uncertainty by its owners over how the stock
market would value Neiman, as well as a desire to monetize on
their investment more quickly.
Last month, Neiman rivals Saks Inc and Nordstrom Inc
each reported disappointing sales gains for the second
quarter, raising concerns that even high-end shoppers were
cutting back on spending.
Saks, which agreed in July to be sold to Hudson's Bay Co
for $2.4 billion, as well as Neiman and Nordstrom, have
largely stopped opening new department stores, instead focusing
on their respective bargain outlet chains.
Neiman returned to its pre-financial crisis sales levels
this year, reporting revenues of $4.5 billion in the 12 months
ending April 27, up 6.5 percent from a year ago, and adjusted
earnings before interest, tax, depreciation and amortization of
REACHING THE LIMIT
The Dallas-based retailer, which operates 41 namesake
departments stores, Bergdorf Goodman, as well as the lower-price
outlet chains Last Call and CUSP, was taken private by TPG and
Warburg Pincus in 2005 for $5.1 billion.
Buyout funds typically have a lifespan of ten years. Eight
years of private equity ownership for a company is therefore
close to the limit of how long funds usually hold investments,
although their can ask for extensions from their investors.
TPG and Warburg Pincus contributed about $1.2 billion out of
their funds as equity for the 2005 deal, according to regulatory
filings. Leonard Green was among the co-investors that
contributed an additional $220 million as equity.
With about $66 billion in capital under management, Ares is
primarily a debt-focused investment firm which also engages in
corporate buyouts. It managed about $9 billion of committed
capital as the end of December through five private equity
funds, according to its website.
Los Angeles-based Ares was founded in 1997 by Tony Ressler
and John Kissick, both of whom worked as bond traders in the
1980s at Drexel Burnham Lambert and in 1990 co-founded
investment manager Apollo Global Management with Leon
Black, Marc Rowan and Joshua Harris.
The Canada Pension Plan Investment Board is one of the
world's largest investors in private equity and manages a $181.5
billion investment portfolio of various assets aimed at
generating returns to pay out pensions for 18 million Canadians.
The Wall Street Journal reported earlier on Sunday that Ares
and the Canada Pension Plan Investment Board were in the final
stages of negotiations to buy Neiman Marcus.