CVC Capital Partners Ltd. and KKR & Co. have expressed interest in buying Neiman Marcus Inc., the luxury retailer that filed for an initial public offering in June, people familiar with the matter said.
Neiman Marcus’s owners, TPG Capital and Warburg Pincus LLC, began exploring an auction or an IPO in May, said the people, who asked not to be named because the process is private. Selling the retailer to another buyout firm may provide a quicker exit than an IPO, one person said. The deliberations are at an early stage and may not yield a deal, the people said.
Price could be a barrier as private-equity suitors may be reluctant to pay more than 9 times Neiman Marcus’s earnings before interest, taxes, depreciation and amortization, said one person. Based on Neiman Marcus’s adjusted Ebitda of $623 million in the 12 months through April, that would be about $5.6 billion, compared with the $5.1 billion TPG and Warburg paid for the retailer in 2005.
Neiman Marcus’s owners, which are working with Credit Suisse Group AG on the IPO, were seeking as much as $8 billion in a sale, two people familiar with the matter said in May. Any private-equity firm would also likely seek a partner on the equity portion of the deal, according to one person.
Representatives at Neiman Marcus, Warburg, TPG, CVC and KKR declined to comment.
Private-equity owners, which can sell their entire ownership in a company in a private sale, typically would have to wait much longer for a full exit after an IPO. The owners, in a public offering, would typically sell a small stake and then be restricted through agreements with other shareholders known as “lockups” from selling additional stock for as much as six months afterward.
KKR had also weighed an investment in luxury retailer Saks Inc. (SKS:US) and considered seeking a merger with Neiman Marcus as part of that plan, people familiar with the matter said in May. Instead, Canada’s Hudson’s Bay Co. (HBC) last month agreed to buy New York-based Saks for $2.4 billion.
Neiman Marcus runs 41 stores under the same name across the U.S. and two Bergdorf Goodman department stores on New York City’s Fifth Avenue, according to its June IPO filing. The company generated $4.5 billion in revenue in the year ended April.
Revenue has failed to increase past pre-financial crisis levels at Neiman Marcus, as so-called aspirational shoppers have been slow to return to stores. Luxury spending in the Americas grew 5 percent on a constant-currency basis in 2012, less than half the 13 percent gain of the previous year, according to Bain & Co. estimates.
To contact the reporters on this story: David Welch in New York at firstname.lastname@example.org; Cristina Alesci in New York at email@example.com
To contact the editor responsible for this story: Jeffrey McCracken at firstname.lastname@example.org