Neiman Marcus Goes Public With $5B Buyout Plan

DALLAS-Though it's been whispered for months, Neiman Marcus Group Inc. has finally gone public about a plan to be sold, setting up a near $5.1-billion swap to a 50-50 partnership between investment powerhouses, Texas Pacific Group and Warburg Pincus LLC. The ownership change will deliver new capital for talked-about issues like adding more stores, but it's not necessarily going to generate a significantly different retail playbook.

Texas Pacific Group, based in Fort Worth and San Francisco, and the New York City-headquartered Warburg Pincus will pay $100 per share for all outstanding class A and B stock of the Dallas-based Neiman Marcus. The cash buyout, which Neiman steadfastly denied until recently, is set to close by Nov. 1.

"Our customers, employees and vendors should know that now, and following the completion of this transaction, it will be business as usual," Burt Tansky, Neiman Marcus' president and CEO, says in this morning's press release. The buy-out partners, though, are recognized for their hands-on strategies, but this could be the exception. Warburg Pincus most often takes a seat at the board table while Texas Pacific is known for taking control of its investments. The Fort Worth powerhouse has a diversified appetite, previously infusing capital into J. Crew, Petco, Burger King Corp., Continental Airlines and even Metro-Golden-Mayer while Warburg Pincus has a portfolio weighted with health care, media, technology and energy companies.

Richard A. Smith, Neiman Marcus' board chairman, whose family has a significant share of the company's equity, has signed a separate agreement to endorse the merger. The company's class A stock opened at $98 per share and class B started trading at $97.12 per share today on the New York Stock Exchange.

Goldman Sachs was Neiman Marcus' adviser for strategic review and the transaction. JP Morgan also acted as financial adviser to Neiman Marcus' board while Simpson Thacher & Bartlett LLP was the legal adviser.

Neiman Marcus been open about its expansion plans for the US. At last count, the luxury retailer had 35 Neiman Marcus stores, 15 clearance centers and two Bergdorf Goodman stores, one in bricks and mortar and the other an online venue that's treated like real estate. In January, company-wide sales were $168 per sf, up $14 per sf from a year ago, according to an SEC filing. The company also projected a 3% to 5% growth in same store revenue in that SEC document, which detailed outstanding long-term debt of $276.4 million.

The retailer, aggressively pursuing new markets, is under construction on its first stores in San Antonio and Boca Raton, FL, both of which are slated to open this year. Remodels are under way in San Francisco, Houston, Los Angeles and Newport Beach, CA. Neiman Marcus's 2005 cap ex is $170 million to $180 million, including upgrades to information and warehouse systems.