Saks to merge with Neiman Marcus?

Bloomberg reported yesterday that American department store operator Saks Fifth Avenue Inc has been exploring options including, with buyout firm KKR & Co. (KKR) ready to 2,3 billion dollars and may seek a merger with closely held rival Neiman Marcus Inc., which is studying a sale. Since the news broke out, Saks stock gain left New York-based Saks at a higher price relative to earnings and free cash flow than any of its U.S. peers, according to data compiled by Bloomberg.

KKR may view a tie-up of Saks and Neiman Marcus as a way to generate higher returns, with Frost Investment Advisors LLC seeing a merger offering the opportunity to close overlapping stores and increase purchasing power. Two important shareholders of Saks, Mexican billionaire Carlos Slim and Italian luxury industry entrepreneur Diego della Valle (owner of Tod’s Group), each with a 15% stake, are closely watching developments seeking to protect their investments.

Saks hired Goldman Sachs Group Inc. to explore strategic alternatives, including a sale, two people with knowledge of the matter said this week. Dallas-based Neiman Marcus is also on the block, with private-equity owners TPG Capital and Warburg Pincus LLC exploring a sale or public offering of the luxury chain, people familiar with the matter said this month. The firms acquired Neiman Marcus in 2005 for about $5.1 billion.


Saks Fifth Avenue, New York flagship