Neiman Marcus is weighing a possible deal to sell itself to archrival Saks Fifth Avenue – a once unthinkable merger of the twin titans of US luxury retailing, The Post has learned.
Dallas-based Neiman – which in addition to its namesake luxury chain owns Bergdorf Goodman in New York – has been casting around for a buyer for months as it grapples with a downturn in its business, sources said.
The 107-year-old retailer could sell for upwards of $2 billion in a sale, insiders estimate – less than half the $5.1 billion it fetched in 2005 in the first of a series of debt-fueled buyouts that ended up crippling the company.
As The Post exclusively reported in June, Neiman’s current private equity owners have squabbled over a potential exit. Neiman’s two minority investors – Davidson Kempner Capital Management and Sixth Street Partners – have been pushing for an immediate sale.
But Neiman’s majority investor – Pacific Investment Management Co., better known as PIMCO – had been willing to hold on longer, arguing that the business will improve, according to sources.
Neiman Marcus’ sales began cooling off this year amidst a slow down in luxury spending.Richard Harbus
Now, Neiman’s persistently disappointing results appear to have finally swayed PIMCO to weigh a possible sale, the sources said. After a July board meeting, all three owners are aligned in considering a potential bid from Saks Fifth Avenue’s Toronto-based owner Hudson’s Bay.
“Neiman’s just had its worst fiscal year since its bankruptcy,” a source with knowledge of the discussion said.
Neiman Marcus CEO, Geoffroy van Raemdonck, has come under fire for his generous compensation package while the company trimmed costs including employees’ pensions and pay during the height of the pandemic.Penske Media via Getty Images
In recent weeks, Hudson’s Bay began exclusive due diligence to evaluate Neiman’s business, sources with knowledge of the negotiations tell The Post.
It is the third time in a decade that Saks has sought to acquire its smaller but formidable competitor with the previous runs falling apart largely over the price tag, sources tell the Post.
Neiman CEO Geoffroy van Raemdonck – who has been blasted over taking lavish pay packages for himself, even as he has laid off employees and slashed pensions – stands to walk away with about $40 million depending on the price Saks pays, according to a source briefed on the talks.
Neiman has tapped Lazard and JPMorgan to run the sales process while Saks Fifth Avenue’s owner Hudson’s Bay is represented by Morgan Stanley and Bank of America.
Saks Fifth Avenue has attempted to buy Neiman Marcus three times over the past decade, sources say.dpa/picture alliance via Getty Images
Saks Fifth Avenue declined to comment.
A spokesperson for Neiman Marcus said: “We do not comment on rumors or speculation.”
Neiman’s private equity owners did not immediately respond for comment.
The merger of Saks, which currently operates 40 stores, with Neiman’s 38 stores would almost certainly face antitrust scrutiny. Insiders say the companies would likely argue that their dominance in luxury has sharply eroded over the past decade with the rise of the internet.
After riding a pandemic high in which shoppers stocked up on luxury goods, Neiman’s sales began cooling off this year leading to two rounds of layoffs, sources said.
This month, Neiman eliminated about 100 corporate employees in what it said represented less than 1% of its workforce. In February, the company laid off another 500 after handing out record bonuses over the past two years.
New York City-based Bergdorf Goodman is often called the ‘crown jewel’ in Neiman Marcus’ portfolio.Christopher Sadowski
In June, Neiman’s financials got leaked, showing that profitability has taken a hit versus last year when stores were still riding a post-pandemic luxury boom.
Neiman’s Ebitda — or earnings before taxes, interest, taxes, depreciation and amortization — was $124 million for the quarter ended April 29 — down 25% from a year earlier, according to Bloomberg, which cited unnamed sources. Revenue dropped 9% to $1 billion, Bloomberg reported.
Van Raemdonck rankled employees earlier this year when he told Fortune the company is focusing more attention on its wealthiest clients – who represent 2% of its customers but account for 40% of its sales. Some employees called the comments “snobbish” and said they were left to do damage control with clients.
Geoffroy van Raemdonck stands to collect about $40 million if he clinches a deal with Saks Fifth Avenue, according to a source.Patrick McMullan via Getty Image
Insiders have also called van Raemdonck out for moving full time to New York City, which he did in March when he sold his Dallas mansion in the posh Lakewood neighborhood for more than $2 million.
The house had been featured in a glossy magazine spread just as Neiman was laying off employees during the pandemic.
Source link: https://nypost.com/2023/08/28/neiman-marcus-in-talks-to-merge-with-luxury-archrival-saks-fifth-avenue-sources/