In an interesting turn of events, just a month after Eddie Bauer Holdings, Inc.
The proposed deal to acquire Eddie Bauer is for $9.25 per share in cash and assumption of $328 million in debt for a combined enterprise value (EV) of $614 million. With Eddie Bauer's $1 billion in sales over the past 12 months, this translates into an EV-to-sales of 0.6. And getting an operation for 60% of sales is quite a deal, assuming the problems can be fixed.
Compare this proposal to Sears', now Sears Holding Corporation's
I can't believe management doesn't also think the current deal is cheap. Eddie Bauer emerged from bankruptcy with a market capitalization of roughly $865 million, with another $300 million of debt creating a $1.2 billion enterprise. At $1 billion in sales, Eddie Bauer began trading at roughly 1.2 times sales, similar to the buyout price of Land's End. However, since last June, shares of Eddie Bauer have fallen significantly and the private equity firms are offering to pay less than half of the original enterprise value.
To drive the point home, consider whether Eddie Bauer can be returned to profitability. Gap
The bottom line is that if Eddie Bauer can be fixed and profitability restored, private equity could be getting quite the steal.
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