Earlier this month it was reported that private equity firms Texas Pacific Group and Warburg Pincus, owners of Neiman Marcus, were exploring a possible initial public offering. Yesterday, the news broke that Saks Inc. had hired Goldman Sachs to explore strategic options, presumably a sale of the luxury department store operator.
Quickly on the heels of the Saks news is another report that KKR is considering making a bid on the company with the intention of seeking a merger with Neiman Marcus. According to Bloomberg News, a combined Neiman Marcus and Saks would create a retail operator with $7 billion in annual sales. That would put the combined company behind only Nordstrom in the luxury department store category.
As with virtually every other merger rumored or completed, proponents of a Neiman Marcus/Saks deal would point to efficiencies that the combined companies would realize.
"You could obviously get a huge benefit to the bottom line," Michael Appel, founder of Appel Associates, told Bloomberg News. "You could keep the customer-facing part of the business — the branding, the merchandising — separate but you could then collapse the two back ends of the companies, like logistics, sourcing. You would get tremendous operating leverage."
Brian Sozzi, CEO and chief equities strategist of Belus Capital Advisors, believes the combination of Neiman Marcus and Saks would create a brick and click powerhouse.
"Combining these two companies enlarges the amount of fashionable, high-margin goods available online," Mr. Sozzi told The Huffington Post. "The customer to these stores is very mobile-friendly, usually spending first and asking questions later."
Perhaps the biggest question if the two companies merged is if both banners would survive.
Steven Dennis, a former Neiman Marcus executive and founder of SageBerry, thinks both chains would carry on because they have cultivated their own core shoppers over the years.
"Shutting one down seems crazy, so the challenge would be to reposition one to maximize the market opportunity," he told The Huffington Post. "Not an easy task."
- Going public could bring more innovation, long-term growth for Neiman Marcus - Luxury Daily
- Saks Said to Hire Goldman Sachs to Explore Options - Bloomberg News
- KKR Said to Weigh Investment in Saks, May Push for Merger - Bloomberg News
- Why A Saks-Neiman Marcus Merger Makes Sense - The Huffington Post