Well, it is owned by the same company that owns 99 Cents Only Stores. A Los Angeles private equity firm and Canada’s largest public pension fund announced this week that they are buying Dallas-based Neiman Marcus Group for $6 billion.
The Canada Pension Plan Investment Board and Ares Management LLC now have both extremes of household incomes covered: In 2011, they paid $1.55 billion to buy 99 Cents Only Stores.
The two entities will hold an equal interest in the retailer, and Neiman Marcus management, led by CEO Karen Katz, will retain a minority stake. The sale is expected to go through in the fourth quarter.
Neiman Marcus hasn’t been owned by the founding family since the late 1980s.
Founded in Dallas in 1907, the company operates 41 Neiman Marcus stores, two Bergdorf Goodman locations, 36 Last Call stores and six Cusp stores. Its upscale online retailing division operates under the Neiman Marcus, Bergdorf Goodman, Last Call and Horchow brands.
Except for the novelty of knowing that about 18 million retirees north of the border own a piece of the venerable luxury chain, customers shouldn’t see any changes, the company said.
“If there had not been press coverage of this, the customer would never know anything had changed,” Neiman Marcus vice president Ginger Reeder said.
Fort Worth-based TPG and New York-based Warburg Pincus have owned Neiman Marcus since 2005 as part of a $5.1 billion leveraged buyout. They were entertaining private buyers while the company was proceeding with plans for an initial public offering of stock.
Bloomberg News estimates that the two buyout firms have reaped a 150 percent profit on their combined $1.2 billion initial investment in Neiman Marcus. The firms are expected to receive about $2.75 billion in the sale on top of $400 million they got last year in the form of a one-time dividend.
Part of the purchase price will be used at closing to repay about $2.7 billion in debt. But that doesn’t mean the company will be debt-free.
Between now and closing, a new capital structure with new debt will be ironed out, Neiman Marcus chief operating officer Jim Skinner said. “There’s still a lot of work to do.”
Even if the company had issued stock to the public, those funds would have gone to TPG and Warburg Pincus, and the retail company would have still had $2.7 billion in debt.
There are no plans yet to open a Canadian Neiman Marcus store. Canadians have been able to shop at Neiman Marcus online for several years.