Neiman Marcus Finally Gets Its Bill of Sale

neiman marcus sold area canada pension system retail department stores

The owners of Neiman Marcus have agreed to sell the U.S. luxury department store chain to Ares Management and the Canada Pension Plan Investment Board for $6 billion, ending a years-long effort to sell the company.

The Dallas-based retailer, which operates 41 namesake department stores, the famed Bergdorf Goodman store on Manhattan's Fifth Avenue and the Last Call outlet chain, was taken private by a group of investors led by private equity firms TPG Capital and Warburg Pincus in 2005 for $5.1 billion.

The buyers said they expected the deal to close in the fourth quarter.

David Kaplan, co-head of Ares' private equity group, said in a statement that the firm shared Neiman's vision and praised the retailer's chief executive officer, Karen Katz.

Neiman has largely stopped opening new department stores, but has focused its attention on e-commerce and the expansion of the Last Call chain.

CPPIB's Andre Bourbonnais said the fund was drawn in part by the expectation of an increase in U.S. luxury spending.

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A portion of the $6 billion price will be used to pay down amounts outstanding on Neiman's credit facilities. Neiman had long term debt of $2.7 billion as of April 27. Neiman's revenue fell dramatically in 2008 because of the financial crisis, but returned to pre-crisis levels this year. It rose 6.5 percent to $4.5 billion in the 12 months ended April 27.

Neiman registered for an initial public offering in July after earlier talks with potential buyers, including sovereign wealth funds, failed to meet the price expectations of its private equity owners, people familiar with the matter told Reuters at the time.

The benefit of a sale over an IPO is that it allows owners to immediately realize their returns. Restrictions and stock market fluctuations can make cashing out on an investment a drawn out affair and make it more uncertain a buyout firm will get a desirable price.

It was the second large deal in two months involving a storied U.S. luxury department store: Saks (SKS) agreed in July to be sold to Hudson's Bay for $2.4 billion.