Final Bids for Barneys Expected Next Week

Financial firms looking to buy Barneys New York, on the block since June, are expected to submit their best and final offers by the end of next week.

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Meanwhile, bankers and merger and acquisition specialists are wondering what will be the final purchase price for Barneys. Financial sources said the retailer’s price tag had been pegged at $400 million, while Barneys’ owners hoped a bidding war would propel that sum further north. That $400 million price tag includes the buyer assuming about $90 million in long-term debt. Assuming due diligence doesn’t kick up any dirty secrets, a bid within the range of $400 million — but probably not much higher — is still likely, bankers said.

According to other financial sources, the process should move fairly quickly once the bids are submitted. While the price offered would likely be the first item on the agenda that is reviewed, investment bankers said the sellers and their advisers would also pay close attention to any restrictions that a lender may place in its letter of commitment for financing. In the end, the bidder in the strongest position — combination of best price and ability to get the deal to fruition — will be the new owner of Barneys.

Of course, just because a firm is still doing due diligence doesn’t necessarily mean a bid will be submitted. Something might come up during the investigative process that causes a lender to say no.

In addition, financial buyers prefer that existing management, because of their proven track record, stay in place and continue to run the acquired firm. In the case at Barneys, the tenure of certain management team members, such as Howard Socol, chairman, president and chief executive officer, would be part of the negotiation process. In the end, it will be the buyer who makes the final decision on which staff members get to stay.

One example is the April purchase by J.W. Childs of Joseph Abboud from RCS MediaGroup for $73 million, less debt. The Boston-based private equity firm immediately hired as president and ceo Marty Staff, whose past posts included stints at Hugo Boss USA Inc. and Calvin Klein Co. Staff replaced Robert J. Wichser, who was president and chief operating officer of JA Apparel while the Abboud operation was owned by RCS MediaGroup.

So far, the Barneys operation seems to be in the right position for a sale. For the three months ended July 31, the most recent numbers available, income was $891,000 or 6 cents a share, versus a loss of $2.1 million, or 15 cents, in the same year-ago quarter. Earnings before interest, taxes, depreciation and amortization skyrocketed 94.3 percent to $9.3 million compared with just $4.8 million last year. Sales rose 14.9 percent to $102 million from $88.7 million, while same-store sales gained 13.8 percent.
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