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Reading the Tea Leaves: As Saks Inc. Nears Deal, SFA Speculation Swirls

As its parent, Saks Inc., inches closer to shedding its northern department store group and Club Libby Lu division, speculation continues to swirl over the...

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R. Brad Martin

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NEW YORK — The fate of Saks Fifth Avenue is still in limbo.

As its parent, Saks Inc., inches closer to shedding its northern department store group — most likely to Bon-Ton — and Club Libby Lu division, speculation continues to swirl over the future ownership of its crown jewel, SFA.

And there's a new wrinkle to the plot: Banking sources said that, if Saks Inc. sells both the northern stores and SFA, chairman R. Brad Martin would still hold onto the reins of the 41-store Parisian chain.

Parisian officially is not for sale and recently has become a stronger property. Sources close to the division said its profitability has been on the rise, and noted that it has new management in place and is doing well in some locations in the Midwest, where it recently expanded beyond its southern roots.

Wall Street's close attention to the goings-on at Saks Inc. was illustrated Monday when a U.K. financial newsletter reported a deal for SFA already had been completed. While sources dismissed the report, it sent skittishness through Wall Street. Shares of Saks closed up 3.45 percent to $21.29. Trading volume was 1.6 million, below the average, three-month volume of 1.9 million. The stock's 52-week high is $24.64, the low is $11.61.

Nevertheless, some sources suggested SFA, with its international reputation, great real estate and upside potential, has garnered much interest, primarily from private equity firms, but also some strategic players. Sale efforts, they said, could resume next month, after the long-delayed second-quarter financials get issued. Accounting irregularities caused a delay in filing certain financial data and the annual report, which was recently released.

"Neiman's left a lot of people at the altar," said one retail source, referring to the recent sale of the Neiman Marcus Group to Texas Pacific Group and Warburg Pincus. While both of those firms also have checked out SFA, they are not believed to be serious players. Others still mooted as possible bidders include Galen Weston, owner of Selfridges in London and Holt Renfrew in Canada; Bain Capital; Blackstone Partners, and Apax. LVMH Moët Hennessy also has been mentioned, but a purchase of SFA is not seen as fitting its modus operandi.
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