KKR Said to Weigh Investment in Saks, May Push for Merger

Saks Fifth Avenue | Source: Saks Fifth Avenue

NEW YORK, United States — KKR & Co. is weighing whether to make an investment in Saks Inc. and may push the luxury retailer to pursue a combination with rival Neiman Marcus Group, said people with knowledge of the matter.

The deliberations may not lead to a transaction, said one of the people, who asked not to be named as the process is private. It wasn’t immediately clear whether KKR had approached New York-based Saks.

Merging the two would create an upscale department-store chain with more than $7 billion in annual sales, second only to Nordstrom Inc. in the U.S. Both Saks and Neiman recently hired advisers to explore strategic options including sales, people with knowledge of the matter said this month. If combined, the two could cut costs by closing stores, one person said.

Saks shares rose as much as 18 percent following Bloomberg’s report. They traded at $16.11 as of 12:55 p.m. in New York.

KKR, which had more than $78 billion in assets under management at the end of March, has a long history of buying retail and consumer companies. In 2005 and 2007, the firm snapped up Toys “R” Us Inc. and Dollar General Corp. for $7.5 billion and $7.3 billion, respectively, according to data compiled by Bloomberg.

Saks earlier hired Goldman Sachs Group Inc. for advice on its options, two people with knowledge of the matter said. The department-store operator may be exploring a sale now because its shares had increased by almost one-third this year before today and interest rates are low, giving potential buyers cheap financing, one of the people said.

Neiman’s Strategy

Neiman Marcus is working with Credit Suisse Group AG on exploring an initial public offering or sale, according to people familiar with the matter. Its owners may seek about $8 billion for the company, which has about 40 namesake department stores and owns Bergdorf Goodman’s two stores in New York, the people said. TPG Capital and Warburg Pincus LLC bought Neiman Marcus in 2005 for about $5 billion, data compiled by Bloomberg show.

Saks generated revenue of $3.15 billion in the year ended Feb. 2. That compares with $4.35 billion in Neiman Marcus’s latest fiscal year, which ended in July. Luxury retailers have fared better during the economic recovery than some of their lower-end counterparts as surging stock markets gave the wealthy the confidence to shop.

By: Cristina Alesci, David Welch with assistance from Mohammed Hadi; Editors: Julie Alnwick, Daniel Hauck