Liz Claiborne (LIZ) Could Bring More Than 50% Premium in Takeover

April 11, 2012 4:02 PM EDT
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Liz Claiborne (NYSE: LIZ) shares have come down off of highs above $13.50 per share hit in late-March following rumors private-equity firms might be bidding a takeover. But the best might be yet to come.

Although LIZ -- which is changing its name to Faith & Pacific Cos. in May -- said its not considering a sale, the move and news has been raising eyebrows. Despite reporting a 2011 loss which was larger than most competitors -- and stop us if you've heard this one before -- the stock is now back up to levels not seen since 2008.

LIZ is expected to be profitable again in 2012, with revs estimated to rise about 14 percent. However, LIZ shares still trade at a discount compared to 94 percent of its peers and are going for a 28 percent discount to estimated 2013 sales.

The Liz Claiborne brand could attract buyers from private equity as well as larger apparel makers Warnaco (NYSE: WRC) and VF Corp. (NYSE: VFC), Bloomberg's Real M&A reported. In addition, LIZ segments Kate Spade and Lucky Brand might also garner $20 per share.

CEO Bill McComb, who joined the company in 2006, started refocusing the company from some 40 labels to just three key brands currently. Last year, LIZ sold its namesake brand to J.C. Penney (NYSE: JCP), Mexx to Gores Group and the Dana Buchman label to Kohl's Corp (NYSE: KSS). The three remaining brands are Kate Spade, Juicy Couture and Lucky Brand. Splitting these remaining brands into separate companies could be a boon for an acquirer, said analyst Jim Chartier at Monness, Crespi, Hardt & Co.

Liz Claiborne is no stranger to takeover speculation. On March 30th shares surged 13 percent after the Wall Street Journal reported private-equity firms were circling the company. The company quickly knocked down the rumors, saying "there is currently no contemplation of any strategy for the company other than executing against the operating plan we have already discussed."

Imperial analyst Ross Gilbert sees VF or Warnaco as ideal strategic buyers for LIZ. Either could be interested in any of the brands on the huge global growth opportunity, he said. Specifically discussing VF, Gilbert said, "they have a denim business that Lucky could fit in and they’re looking to expand their offering of high-end brands, where Juicy and Kate would fit."

Three analysts quoted in the Bloomberg article believe a takeout price of $20 per share or above could make sense. That would represent a 56 percent premium to the current price of $12.86 per share.

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