Jones Sells Barneys to Dubai Group for $942M, Ending Bidding War

Includes: FRCOF, JNY
by: Susan Lerner

The battle for Barneys New York ended Thursday as Japan's Fast Retailing Ltd. pulled out of the bidding leaving Dubai's Istithmar victorious in the competition for the mens wear chain with a $942.3M bid. "The price we suggested was very different from what they had in mind," a Fast JNY 09 08 2007 Chartspokesperson said. Jones Apparel Group, which owns Barneys, had agreed in June to sell the chain to Istithmar for $825M after which Fast offered $900M, prompting Istithmar to match that bid, which was followed by a $950 offer from Fast (full summary). Because Jones was obligated to pay Istithmar a $22.7M termination fee had it accepted the Fast deal, it ultimately would have received just $927.3M -- $15M less than Istithmar's latest offer. Under terms of the new deal, Jones is permitted to cancel the agreement if Fast Retailing raises its bid and Jones determines it is a "superior transaction," but would have to pay a termination fee of $34.7M, $12M more than the earlier agreements. Jones purchased Barneys for $400M in 2004. It is expected to use the proceeds from the sale to repurchase stock, pay off some debt and invest in its core business. Fast shares jumped more than 10%, its biggest gain in more than four years, on speculation the deal would fall through, as investors had worried that Barneys was overpriced and that it would be difficult to achieve operational synergies. Istithmar said earlier this year it would spend $1.7B to buy retail, industrial and financial-services companies. It is expected the company might add to the seven existing Barneys locations.

Sources: Press release, Thomson Financial, Wall Street Journal, Bloomberg, Reuters
Commentary: Jones Apparel Group: No Catalysts In Sight to Boost Ailing StockJones Apparel: Room to Grow -- Barron's
Stocks/ETFs to watch: JNY, FRCOF.PK. Competitors: ANN, LIZ. ETFs: RTH

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