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On Mervyn’s, a source familiar with the “book” of financial information on the chain said the retailer has a liquidation value of at least $1 billion, noting the chain owns a lot of its property. Previously, industry sources felt Mervyn’s would most likely be sold off in pieces, and cherry-picked for locations by such chains as T.J. Maxx and Kohl’s. Financial investors are now said to have expressed interest in Mervyn’s, though, including Kohlberg-Kravis-Roberts. The Blackstone Group also reportedly examined Mervyn’s. Blackstone and KKR officials couldn’t be reached for comment.
“Personally, I think there is at least a 50 percent chance Mervyn’s will be sold off in pieces or liquidated,” said the financial source. “But, because of the sheer scale of it and its dominance in Texas and California, and because of all the interest retailers have in selling more to the Hispanic population, a lot of people are looking at Mervyn’s, including a number of private equity guys who would need to find an operator, like a retail ceo, to partner with.”
The 266-store Mervyn’s is regarded as long neglected by a parent corporation devoting more resources to the Target chain, but is still profitable with moderate growth potential. Mervyn’s spits out close to $200 million in annual EBITDA and has the potential to capitalize further on Hispanic customers, considering Mervyn’s two biggest markets are Texas and California. “It’s like an annuity. It’s not high growth. It’s not very exciting but it continues to generate cash,” said the financial source.
Goldman Sachs, which is handling the Target Corp. sell-offs, has been distributing four “books” containing confidential financial data on the retail and credit card operations of Field’s, and the retail and credit card operations of Mervyn’s.
“Target is allowing you to bid either way,” said the financial source. “There’s flexibility.”