Specialty retailer Eddie Bauer Holdings
However, the company recently filed an 8-K document with the SEC, which provides great insights regarding how this deal got done (or almost didn't). Here's what I found.
Eddie Bauer emerged from bankruptcy in June 2005. Two months later, it launched a new product line. Unfortunately, the results were disappointing, with continued declines in same-store sales.
The company was a mess. Same-store sales had fallen for about six years; EBITDA was expected to continue to decline in 2006 and 2007; and there were vacancies in critical areas, including the chief operating officer, chief marketing officer, and a variety of VP positions. Because of the deterioration, the company was limited by its loan covenants, unable to increase expenditures on marketing and capital improvements.
So in May 2006, Goldman Sachs
Goldman talked with 96 prospective buyers, of whom 45 expressed interest. After further winnowing, there were six preliminary bids (including four from private equity firms), which ranged from $4.41 to $13.00 per share.
By late September, only one investment group -- Golden Gate and Sun Capital -- submitted a final bid. The price: $7.75. With negotiation, the investment group increased the bid to $8.25 and finally to $9.25.
The bottom line
In light of the deep problems at Eddie Bauer, it's amazing that the company found a willing buyer. Then again, Golden Gate and Sun Capital have a strong background in retail, with deals for firms such as Herbalife
But private equity is hungry for deals. It seems nearly every day brings a new buyout rumor, including even biggies like Gap
Further rugged, outdoorsy Foolishness:
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