Bloomberg News

Starwood Capital Said to Join Bidding for Saks Department Stores

July 20, 2013

Saks Jumps on Report Starwood Capital Has Made a Bid for Chain

Saks’s annual sales haven’t recovered from their pre-recession high. The retailer posted revenue of $3.15 billion last year, short of the $3.28 billion it recorded in the retail year that ended in early 2008. Photographer: Scott Eells/Bloomberg

Starwood Capital Group LLC, the investment firm led by Barry Sternlicht, has joined the bidding for the Saks Inc. (SKS:US) luxury department-store chain, according to a person familiar with the matter.

The person, who asked not to be identified because the talks are confidential, didn’t disclose the value of the offer by the Greenwich, Connecticut-based firm.

Saks, which is based in New York, has hired Goldman Sachs Group Inc. for advice on its options, two people with knowledge of the matter told Bloomberg News in May. The company’s sales haven’t recovered from their pre-recession high. Last year, the retailer posted revenue of $3.15 billion, short of the $3.28 billion it recorded in the retail year that ended in early 2008.

The company could fetch $16 a share in a buyout, Michael Binetti, an analyst at UBS AG in New York, wrote in a note to clients on May 21. That would value the retailer at $2.4 billion, or about 8.5 times earnings before interest, taxes, depreciation and amortization.

Saks rose as much as 19 percent yesterday after the New York Post reported that Starwood Capital has offered between $17 and $18 a share for the chain, equal to an offer from Hudson’s Bay Co. (HBC) The newspaper cited an unidentified source and said a Middle Eastern sovereign wealth fund may be a third bidder.

The company’s shares increased 8.2 percent to $15.89 at the close in New York, after climbing as high as $17.51. They’ve climbed 51 percent this year, compared with the Standard & Poor’s 500 Index’s 19 percent gain.

Underperforming Branches

Julia Bentley, a spokeswoman for Saks, didn’t respond to an e-mail seeking comment. Tom Johnson, a Starwood Capital spokesman with New York-based Abernathy MacGregor Group, declined to comment.

Chief Executive Officer Stephen Sadove, who has held the post for six years, has been closing the chain’s underperforming branches. It operates 42 namesake stores, compared with 54 in early 2007. Industry sources value the Fifth Avenue flagship store at $1 billion, Liz Dunn, an analyst at Macquarie Group in New York, said.

Starwood Capital invests in retail, office and residential real estate.

To contact the reporter on this story: Cotten Timberlake in Washington at ctimberlake@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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