Just In Time for ICSC: Inside the Neiman Marcus Deal

Today Neiman Marcus Group announced that its board of directors has approved a sale of the company to an investment group consisting of Texas Pacific Group and Warburg Pincus. The price is $100 per share in cash, for a total of $5.1 billion. Each of the investors will own equal stakes in the company upon completion of the transaction.

"The play for us is a long-term play on the continued spending in the luxury segment. This is more a play on luxury than retail," Kewsong Lee, a Warburg Pincus partner, told The Wall Street Journal. Texas Pacific representatives declined to comment.

People familiar with the private-equity groups' plans say the goal is to build between five and 15 new stores while expanding the company's Internet and catalog operations. The timing of this transaction precedes the major shopping center leasing conference in a few weeks, and will present owners of fortress malls with an alternative to Federated/May brinksmanship or the conversion of existing department store anchor space to Target's retail/grocer concepts, or worse.

By building out their Internet operations, especially its foreign language versions, Neiman Marcus will be able to combine their web server and shopping cart data to identify which emerging regions in China, India and Latin America have the greatest appetite for luxury goods, and therefore where to build and how to merchandise.

Cataloguing is also going through a renaissance with the popularity of luxury city magazines and custom publishing to niche audiences. Even Louis Vuitton has begun publishing local guides that cater to affluent, style-conscious travelers.

Texas Pacific already has retail experience after acquiring 85% of family-owned clothing retailer J.Crew in 1997, as well as less luxury-oriented brands like Pets.com and Burger King. After a major turnaround, J. Crew is expected to seek an initial public offering later this year.

Link: "Retailer Neiman Marcus Agrees to be Acquired" (WSJ subscription required)