Saks Owner HBC Secures $2 Billion Bond to Buy Neiman’s
As Saks Fifth Avenue parent HBC inches closer to its deal to buy Neiman Marcus Group, it is taking a close look at its own store portfolio and is said to be closing its Palm Beach, Fla. store.
But overall, the Saks world is set to get much bigger.
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According to sources, HBC has secured a $2 billion-plus junk bond this week that puts the company firmly on track to close its deal to buy the Neiman Marcus Group.
HBC declined to comment on both reports Wednesday.
Saks’ store on Worth Avenue in Palm Beach is among the luxury chain’s oldest stores, having opened in 1926, just two years after the Saks Fifth Avenue flagship opened in Manhattan. The location is expected to close next year.
Saks Palm Beach is said to be in need of upgrades, which Saks has apparently decided not to do. While the main floor has held up over the years, particularly with a popular footwear and beauty area, the upstairs level for women’s sportswear has needed an overhaul. Saks continues to operate its store in Palm Beach Gardens, which is about 13 miles from Palm Beach.
Neiman Marcus closed its nearby store on Worth Avenue several years ago.
Last July, the Richard Baker-led HBC reached a definitive agreement to buy the Neiman Marcus Group for a total enterprise value of $2.65 billion. The transaction could close in a matter of weeks and would bring Saks Fifth Avenue, Saks Off 5th, Neiman Marcus and Bergdorf Goodman under the Saks Global umbrella.
The Saks-Neiman Marcus merger cleared a key hurdle in August when the Federal Trade Commission decided to let the deal go through without a second request for more information.
WWD reported on Nov. 27 that HBC was working with Jefferies Financial Group on a bond and that it was being well received.
Bloomberg reported Wednesday that a $2.2 billion junk bond financing the acquisition saw strong demand. The bond market is currently strong and attracting investors with high yields on long-term debt. Bloomberg also reported that HBC boosted the bond by $200 million.
According to Baker, HBC’s executive chairman and chief executive officer, Saks Global is on track to generate $10 billion in sales, with Saks accounting for about $6 billion in sales and Neiman’s, $4 billion.
Based on very recent speculation that the price tag on Neiman’s would exceed $3 billion, it appears that HBC, at the $2.65 billion price, is getting a good deal. Amazon is an investor in the deal, as is private equity giant Apollo as well as Salesforce. HBC secured a $1.15 billion term loan in financing from investment funds and accounts managed by affiliates of Apollo.
Authentic Brands Group plans to make a minority investment in Saks Global after the Saks deal to acquire Neiman Marcus Group closes. Saks and Authentic have formed a venture to grow luxury brands, called Authentic Luxury Group, which the principles in the partnership said will initially focus on Authentic Brands-owned luxury and accessible luxury names, including Barneys New York, Judith Leiber Couture, Hervé Léger and Vince.
One source told WWD that other undisclosed entities are involved in the deal.
Closing the deal would be good news for vendors, considering Saks has been delinquent on payments. Multiple sources say it continues to be slow in paying vendors. In August, a rare conference call between Baker; Marc Metrick, CEO of Saks Global, and Jennifer Bewley, chief financial officer of HBC, provided updates to Saks and Saks Off 5th vendors. While apologetic about how vendors have been treated, the executives urged them to stick with Saks and Saks Off 5th, and expressed extreme confidence that the deal to buy the Neiman Marcus Group would soon close, ultimately benefiting — and not hurting — them.
The executives said at the time that new financing and equity infusions through the deal, future property sales and fall 2024 selling would improve liquidity, helping them to catch up on outstanding payments to vendors, many months past the average 60-day period. At the same time, however, a merger would enable HBC to exert greater buying clout over vendors.
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