NEW YORK — El Corte Ingles SA, a Madrid-based department store operator that holds 16.7 percent of Gottschalks’ outstanding shares, could be preparing to acquire the regional department store chain, people familiar with the company said.
Now that it’s free of shareholding restrictions, privately held El Corte might make a tender offer to purchase the shares it doesn’t own. The Spanish retailer entered into an agreement with Gottschalks when Gottschalks purchased the Harris Co. from El Corte in 1998. The agreement, which was amended last December, said El Corte could not acquire more than its 16.7 percent stake — 2.1 million shares, according to a document filed with the Securities and Exchange Commission.
Amending this accord signals that El Corte might be making plans to acquire Gottschalks, market experts said. One analyst valued Gottschalks at about $18 a share. The company has a market capitalization of $136.4 million.
Gottschalks’ shares reached a 52-week high of $10.60 intraday on Friday. The shares closed at $10.54 on the New York Stock Exchange, up 2.8 percent. In the last year, Gottschalks had earnings of $5.8 million, up from $1.9 million in 2003.
El Corte, which operates about 80 department stores and 30 hypermarkets in Spain and Portugal, isn’t the only company that could focus on Gottschalks. The U.S. retailer’s real estate portfolio looks appealing because consolidation in the department store sector has left slim pickings. Other interested candidates might be Vornado Realty Trust and J.C. Penney Co.
Fresno, Calif.-based Gottschalks is seen as a takeover target because of its relatively small size — 64 full-line stores — with gross square feet per store of 25,000 to 208,000. That dramatic variation in the store sizes, however, is one reason a buyout hasn’t taken place sooner, people familiar with the company said.
Gottschalks executives were unavailable for comment.
Because Gottschalks has store locations in older communities, which have significantly lower occupancy costs, they are appealing to other retailers. “Retailers want to be in these…older, more densely populated communities,” said independent retail analyst Richard Hastings. “That makes Gottschalks very attractive as a buyout.”
Even though Gottschalks views El Corte as a long-term partner, according to market sources, one buy-side analyst who preferred not to be named had a different view.
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Gottschalks “has survived and thrived because of the support of El Corte. If the ‘Wal-Mart of Spain’ was not backing this company, it would have gone bankrupt,” he said.