Let’s make a (private equity) deal!
BC Partners’ $8.6 billion deal last month to acquire PetSmart has created a speculation boom regarding which retailer will be the next target of a leveraged buyout. The first four to hit the rumor mill, according to separate reports by Bloomberg News and Reuters, are Bed Bath & Beyond, Dick’s Sporting Goods, GameStop and Pier 1 Imports.
According to Reuters, Dick’s is in the early stages of discussions with interested parties. The $6 billion sporting goods chain operator is seen as an attractive target because the company’s shares have not kept up with peers in the market. Of course, merely the hint of a prospect of a deal was enough to drive Dick’s share price up in trading yesterday.
Dick’s Sporting Goods’ third quarter total same-store sales were up 1.1 percent, with its namesake chain up 1.7 percent and its Golf Galaxy business down 8.9 percent. Analyst expectations are the company still has many years of growth ahead.
Both Bloomberg and Reuters reported that the combination of equity firms with plenty of cash on hand and low interest rates make now a good time to buy. The retail business, David Strasser, an analyst with Janney Montgomery Scott, told Bloomberg, is "a category that people love to come to for buyouts."
- Pier 1, Dick’s Are Among Retail LBO Picks: Real M&A – Bloomberg News
- Dick’s Sporting Goods explores going private: sources – Reuters
- DICK’S Sporting Goods Reports Third Quarter Results – DICK’S Sporting Goods, Inc.
Do you think the conditions are right for more retail acquisitions? Do retailers typically benefit as a result of being acquired by private equity firms?