July 06, 1998
Saks and Proffitt's to Merge in $2.1 Billion Deal
ALEXANDRIA, VA (July 6, 1998) /FOOLWIRE/ -- Saks Fifth Avenue parent Saks Holdings Inc. (NYSE: SKS) sought a merger and got one. Yesterday evening, Saks and Birmingham, Ala.-based regional department store company Proffitt's Inc. (NYSE: PFT) announced that they will merge in an all-stock deal valued at around $2.1 billion, based on Proffitt's Thursday closing price of $40 11/16. Saks shareholders will receive 0.82 Proffitt's share for every Saks share. The deal values Saks at $33.36 per share, a 15% premium to the company's last closing price of $29.
After the merger, Saks Fifth Avenue will become a subsidiary of Proffitt's Inc., whose corporate name will be changed to Saks Inc. Proffitt's Chairman and CEO Brad Martin will hold the same titles in the combined company, which will be based in Birmingham. Saks Fifth Avenue Chairman and CEO Philip Miller and Vice Chairman and Chief Operating Officer Brian Kendrick will continue in their respective positions. Both will become members of the new Saks Inc.'s board of directors.
The companies expect to see cost and growth synergies of roughly $10-$12 million this year, $60-$70 million in 1999 and $75-$85 million in 2000. Proffitt's projects the deal will be accretive to its per-share earnings by a penny or two in the fourth quarter (the merger is expected to be completed in the third quarter) and $0.03 to $0.05 in 1999. The new Saks Inc. is anticipated to achieve Q4 EPS of around $0.96, 1998 EPS of $1.66, and 1999 EPS of $2.20.
The companies figure that Proffitt's will provide Saks Fifth Avenue with the "infrastructure support and funding to successfully capitalize on its many growth opportunities" worldwide. In exchange, Proffitt's will get the prestige and recognition of the Saks name as well as a chain of just under 100 high-end department stores that don't overlap with its existing stores.
Proffitt's now operates 230 department stores and four free-standing furniture stores in 24 states under the names Proffitt's, McRae's, Younkers, Parisian, Herberger's, Carson Pirie Scott, Boston Store, and Bergner's. Its revenues for the 12 months ended May 2 totaled $3.6 billion compared with Saks' $2.3 billion. Proffitt's net income before one-time items was $139.6 million versus $57 million at Saks. The New York-based company runs 41 Saks Fifth Avenue Full-Line stores, eight Saks Fifth Avenue Resort stores, seven Saks Fifth Avenue Main Street stores, and 40 Off 5th stores in 27 states. Saks also operates a direct-mail business by the name Folio.