Jones Buys Barneys for $400M

In a conference call regarding the merger, Peter Boneparth, Jones' president and CEO said they are involved in some "very active negotiations about real estate opportunities," but would not reveal specific cities. It is rumored that a flagship will be added in Boston's Copley Place. Concept stores will open in Costa Mesa, CA, Chicago and Atlanta early next year. "My impression is at first blush people may not understand fully, but once you layout our acquisition strategy it will become clear... We do understand retail. We saw an opportunity to enter a segment where we have no exposure and that doesn't cannibalize our existing business."

Socol and his management team will continue to operate the company, Boneparth pointed out. The transaction, which was approved by the boards of both Jones and Barneys, includes cash consideration of $19 per share to Barneys stockholders totaling $294.3 million. Jones will also fund the repurchase of all of Barneys' outstanding senior secured notes due 2008, with a face value of $106 million, through a tender offer which will be executed by Barneys. "It's a very fair price based on growth strategy," noted Wesley Card, chief operating and financial officer of Jones.

The financial adviser to Jones was Citigroup Global Markets Inc. Barneys was advised by Peter J. Solomon Co. and Morgan Stanley. In July of 2001, a private investment group paid $175 million for Barneys' 420,000-sf of flagship retail space. The five-story 115,000-sf Beverly Hills building stands at 9570 Wilshire Blvd. The New York store has 264,500 sf and is located at 660 Madison Ave. The Chicago store has 47,500 sf at 25 E. Oaks St. in the city's Magnificent Mile District. Barneys generated net sales of $444.2 million and operating income of $32.8 million for the twelve months ended July 31.