NEW YORK — The mergers and acquisitions activity around Parisian and Lord & Taylor is heating up.
Financial sources said George Jones, the former head of the Saks Department Store Group, has joined forces with private equity firm Freeman Spogli to make a run for the 39-unit Parisian chain of department stores, and a book, or sales prospectus, is said to be coming out as soon as today for Federated Department Store’s Lord & Taylor unit. Suitors eyeing L&T are primarily financial players who would team with real estate developers, financial sources said.
Jones at one point was said to be contemplating bidding for either Parisian or Lord & Taylor, but he is now understood to be focused exclusively on making an offer for Parisian, a retailer he knows well, having once overseen its operation when he was at SDSG before retiring from Saks Inc. last year.
Aside from Parisian, SDSG previously included the Carson Pirie Scott group of stores and the Proffitt’s and McRae’s businesses. Bon-Ton Stores Inc. completed its acquisition of the Carson Pirie Scott operation last month. The Proffitt’s and MacRae’s businesses were sold last year to Belk Inc., a privately owned department store company.
Sources also said Belk is eyeing Parisian, but investment bankers and real estate specialists told WWD that it is interested in only some of the 39 units. In contrast, the Jones/Freeman Spogli team would acquire the entire Parisian operation as a going concern.
Jones declined comment Thursday, and directors at Freeman Spogli could not be reached for comment. Executives at Belk did not return phone calls for comment at press time.
Parisian’s stores are located in the Southeast and Midwest. The Saks Inc. Web site described Parisian as “positioned within the competitive landscape as a ‘special’ department store.” The site also said the focus of Parisian is to “differentiate itself from the traditional department store with unique designs, a higher level of personalized service and a balanced assortment of better-priced brands and unique products.”
Parisian’s annual volume is around $750 million. In 1996, it garnered a $453 million price tag when Proffitt’s bought the chain. Proffitt’s was later renamed Saks Inc., after its acquisition of Saks Fifth Avenue in 1998. Brands carried by Parisian include Karen Kane, BCBG, Garfield & Marks, Tahari, Hugo Boss, Bobbi Brown and Laura Mercier. Founded in 1887 in Birmingham, Ala., by sisters Bertha and Estella Sommers, it was primarily owned by the Carl Hess family before going public in 1983.
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Freeman Spogli is a private investment firm focused on retail and direct marketing. It was founded in 1983 and its Web site said the firm has invested about $2.2 billion in 38 portfolio companies. Some of those include jewelry and accessories firm Ross-Simons and kitchenware and tabletop retailer Sur La Table. In 2004, the investment firm raised $1 billion for its private equity firm, FS Equity Partners V.
As for L&T, owner Federated Department Stores is said to have received over 50 expressions of interest from would-be suitors, although one investor eyeing the sale said many of those “expressions of interest” are likely to be from developers looking to buy the properties and convert them.
Few strategic players are said to be interested in the 180-year-old business, although a handful might eye a few choice locations. While Federated is believed to be interested in selling the operation as a whole, Wall Street analysts and several investment bankers believe a likely buyer would be a financial player working with a real estate conglomerate, such as a real estate investment trust, because of the inherent value of L&T’s Fifth Avenue flagship in Manhattan.
The flagship is a 10-story, 610,000-square-foot site that one private equity managing director, who specializes in real estate, said would be “ideal for retail on the ground floor and residential condos on the upper floors.”
Once known primarily as an upscale retailer and a go-to resource for dresses, L&T began offering lower-priced merchandise after it was acquired by May Department Stores in 1986. May began repositioning L&T three years ago, moving it back to a more upscale image. Although sales in the most recent fourth-quarter and holiday period were up under the leadership of chief executive officer Jane Elfers, Federated has decided to focus on building its core Macy’s chain as a national brand.
Founded in 1826, L&T had sales in 2004 of $1.56 billion, according to Federated. Several analysts believe L&T could sell for $745 million, after taxes. At least one New York analyst thinks the Fifth Avenue flagship is worth nearly half that on an after-tax basis, excluding air rights, or about $360 million.