Jones Apparel Group Inc. said Tuesday its board is considering a possible sale of the entire clothing and accessories maker whose brands include Jones New York, Evan-Picone and Gloria Vanderbilt. Its shares soared more than 12 percent.
The company appears to be taking advantage of a cash-rich environment for private equity players, which have snapped up a string of retailers including Neiman Marcus Group Inc. and Toys R Us Inc. in deals that made them private companies.
“It is a pretty frothy market out there, and there is a lot of capital,” said Michael C. Appel, managing director of Quest Turnaround Advisors LLC. “(Jones) is looking at a window of opportunity where they can get a premium,” for their shareholders.
In December, apparel maker Tommy Hilfiger Corp. announced it agreed to be sold to Apax Partners, a private investment company, for $1.6 billion in a deal expected to be completed in April. Neiman Marcus finalized its acquisition last October by Texas Pacific Group and Warburg Pincus for $5.1 billion. And last July, the $6.6 billion purchase of Toys R Us was completed by two private equity firms, Kohlberg Kravis Roberts & Co. and Bain Capital Inc., and a real estate developer, Vornado Realty Trust.
Jones’ announcement confirmed a report, published Tuesday, in industry trade paper Women’s Wear Daily about a possible sale. Jones also said it was not considering selling any of its divisions, denying recent reports quoting unnamed sources that have said Jones was looking to shed its disappointing Nine West footwear chain.
Jones said it hired investment bank Goldman, Sachs & Co. to help it in the sale process.
The Bristol, Pa.-based apparel maker and retailer has been on an acquisition kick over the past several years. In 1999, it purchased Nine West Group, and since then has purchased such companies as McNaughton Apparel Group, a maker of moderate-priced clothing, and the Kasper brand in bankruptcy. Jones made its foray into the luxury sector in late 2004 with the purchase of Barneys New York.
But Mark Vidergauz, managing director of The Sage Group, an investment banking firm that focuses on the apparel sector, noted that Jones has been faced with a dearth of “good size” companies to buy, and he applauded the move as a way for Jones to best maximize shareholder value.
Jones, like many of its apparel rivals, has faced challenges over the past year amid increasing retail consolidation, particularly Federated Department Stores Inc.’s acquisition of May Department Store Co. last year. Such consolidation has put more pressure on Jones and other apparel suppliers as it gives Federated more power in negotiations. Like many of its rivals, Jones has been expanding its own retail stores to become less reliant on the Federated outlets.
For the year ended Dec. 31, Jones earned $274.3 million, down 9 percent from $301.8 million in the year-ago period. Sale rose to $5.01 billion, from $4.6 billion in 2004.
“With all these mergers, the future is unclear. This is a transitional time for vendors like Jones,” said Dan Hess, founder and CEO of Merchant Forecast, a New York-based research firm.
Hess noted that being private and therefore not being under shareholders’ scrutiny can be liberating, but “you still have to make money.” He speculated that a private equity group would buy the entire company and then sell it in pieces.