updated 11/11/2004 10:21:15 AM ET 2004-11-11T15:21:15

In a move into the luxury arena, the shoes and clothing company Jones Apparel Group Inc. is buying upscale clothier Barneys New York Inc. for $294.3 million in cash.

Under the deal announced Thursday, Jones will pay $19 per share to Barneys stockholders. In addition, it will assume about $106 million in Barneys debt.

The boards of both companies have approved the transaction, and stockholders of Barneys owning approximately 75 percent of its common stock have indicated they support the deal. Therefore, no further stockholder action will be required to approve the transaction.

The offered price is below Barney's closing price of $20.05 in over-the-counter trading on Wednesday. But the shares are very lightly traded and were changing hands at $18 a share in mid-October.

In June, Barneys said that it was exploring strategic alternatives that could include the sale of the company in a bid to reach it growth potential. The retailer had retained investment banking firms Morgan Stanley and Peter J. Solomon Co. as financial advisers.

Barneys emerged from bankruptcy in 1999. Its two majority ownership investors, Whippoorwill Associates Inc. and Bay Harbour Management LC, had focused on strengthening its place in the luxury market.

Barneys, which had net sales last year of $442.2 million, operates flagship stores in New York City, Beverly Hills, and Chicago. In addition, Barneys has three regional full-price stores, four CO-OP Barney New York stores, which focuses on young trendy fashions, and 11 outlets stores. Barneys also maintains corporate offices in New York City, an administrative and distribution center in Lyndhurst, N.J., and has approximately 1,400 employees.

Jones Apparel generated $4.3 billion in sales last year. In addition to its Jones brands, the company also recently acquired Gloria Vanderbilt and Kasper, which owns the Anne Klein label. It also owns the Nine West shoe brands.

Howard Socol, chairman and president and chief executive officer of Barneys and his team will continue to operate the company as well as lead the expansion effort that is under way.

"Today marks an exciting milestone for Barneys," said Socol in a statement. "We see tremendous opportunity as we continue to build upon our success as part of Jones Apparel Group."

He noted that Barneys has enjoyed a solid year of 18 percent increases in same-store sales through July 31. Same-store sales are sales at stores opened at least a year. He added that the company has identified future sites for expansion, and it is reviewing new locations for its CO-OP concept beyond the spring 2005 opening in Chicago, Costa Mesa, Calif., and Atlanta.

Peter Boneparth, president and chief executive of Jones Apparel, said in a statement that the acquisition fits into the company's move toward diversification.

"Barneys provides the next level of diversification to this mix by introducing a new competency in luxury specialty retailing," Boneparth said. With this deal, retail will now account for 24 percent of the company's projected 2005 net revenues, up from 17 percent. And revenues distributed through the specialty retail channel will now make up 28 percent, up from 21 percent.

Barneys will not hold a stockholders meeting in connection with the transaction. The transaction is not subject to any financing contingency and the parties anticipate closing in or about December 2004.

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