In the largest ever deal struck in the luxury department store sector, Neiman Marcus just went to Ares Management and Canadian Pension Plan Investment Board. The American store chain sold for a whopping sum of $6 billion, a marked $1 billion above its original purchase rate of $5.1 billion back in 2005. After affluent shoppers scooping up $5,000 handbags from the store all these years, of course its sale didn’t go down without one last over-the-top splurge on the part of the purchaser.
In true manner of private equity investors, the current owners led by TPG and Warburg Pincus preferred going public over holding on to the property any longer. Fortunately for them, the day didn’t come and what came instead were brilliant buyers. “We plan on investing meaningful capital into the business to ensure Neiman’s long-term position as the unparalleled leader in luxury retail,” David Kaplan, co-head of private equity at Ares, said in a statement. The two new owners will hold an equal economic interest in Neiman Marcus, and the company’s management will retain a minority stake.
The 79 store-strong Neiman Marcus has long been reputed for its indulgent methods and customer service that exceeds the standard. It launched the industry’s first customer loyalty program in 1984 with InCircle, which now has 144,000 members and generated 40 percent of the company’s total revenue in the latest fiscal year. Neiman Marcus also became the first major luxury store to go online, in 2000. “I have great confidence that our customers, associates and vendor partners will share my enthusiasm that our new investors will help us pursue a business dedicated to luxury and fashion, attentive service and innovative marketing,” Karen Katz, the chief executive of Neiman, said in a statement.
Luxury sector watchers would remember that earlier this year, Saks Fifth Avenue also went to Canadian department store Hudson Bay for $2.4 billion.