Nomura Securities: The Changing Face of Retail Transactions - 2011 Very Different Than LY
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Rating Summary:
2 Buy, 11 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 21 | Down: 24 | New: 29
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Nomura Securities: The Changing Face of Retail Transactions - 2011 Very Different Than LY by Paul Lejuez
Lejuez said, "After a Few Big Transactions LY, Deal Talk Resurfaces - Last week Sycamore Partners made a $3/share bid for Talbot's (NYSE: TLB), and Golden Gate Capital gave PacSun (Nasdaq: PSUN) $60MM in financing in return for preferred stock convertible into a 17% stake in the company. This is in addition to a few other transactions that have occurred in the mall retail space this year."
"But Something’s Different This Time...There are stark differences in the size, type, and quality of the private equity deals this year vs. what we saw in retail last year. The J. Crew (JCG) and Gymboree (GYMB) transactions in late 2010 were in the $1.8BN-$2.7BN range, and at the time those retailers were considered high quality companies with strong growth prospects. The deals announced in 2011 to-date are significantly smaller (~$200MM on average) and have been focused on struggling turnarounds and non-bricks and mortar retailers."
"Lesson Learned in Mall Retail? Perhaps the fact that JCG and GYMB have not posted good results since their buyouts last year has served as a warning to any investment capital looking for a home in the mall retail space, highlighting the ups and downs specialty retailers often experience."
"Bigger Capital Commitments Are Off-Mall - Importantly, there have been several larger deals outside the mall this year (Jo-Ann Stores, 99 Cents Only (NYSE: NDN), BJs). It seems clear that the bigger capital commitments are being placed away from mall retail, very different than a year ago."
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Lejuez said, "After a Few Big Transactions LY, Deal Talk Resurfaces - Last week Sycamore Partners made a $3/share bid for Talbot's (NYSE: TLB), and Golden Gate Capital gave PacSun (Nasdaq: PSUN) $60MM in financing in return for preferred stock convertible into a 17% stake in the company. This is in addition to a few other transactions that have occurred in the mall retail space this year."
"But Something’s Different This Time...There are stark differences in the size, type, and quality of the private equity deals this year vs. what we saw in retail last year. The J. Crew (JCG) and Gymboree (GYMB) transactions in late 2010 were in the $1.8BN-$2.7BN range, and at the time those retailers were considered high quality companies with strong growth prospects. The deals announced in 2011 to-date are significantly smaller (~$200MM on average) and have been focused on struggling turnarounds and non-bricks and mortar retailers."
"Lesson Learned in Mall Retail? Perhaps the fact that JCG and GYMB have not posted good results since their buyouts last year has served as a warning to any investment capital looking for a home in the mall retail space, highlighting the ups and downs specialty retailers often experience."
"Bigger Capital Commitments Are Off-Mall - Importantly, there have been several larger deals outside the mall this year (Jo-Ann Stores, 99 Cents Only (NYSE: NDN), BJs). It seems clear that the bigger capital commitments are being placed away from mall retail, very different than a year ago."
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