Saks (SKS) LBO Could be Worth $16 to $19 - Analyst

Last week the New York Post reported that Barry Sternlicht has submitted a potential bid for Saks (NYSE: SKS) within the $17-$18 range. Sternlicht's plan is to split Saks' real estate portfolio from the retailer in order to monetize assets. Sternlight is thought to be leading other bidders, including Hudson's Bay and a third bidder believed to be a Middle Eastern sovereign wealth fund based in Qatar.

Commenting Deutsche Bank's Paul Trussell said, "Our LBO model suggests a potential price range of $16 to $19, with $17.00 putting SKS at a similar PF net rent adj. leverage ratio to the 2005 Neiman Marcus deal at ~7.1x (assuming 35% equity) with higher price points suggesting a much larger equity stake or an immediate monetization of the real estate, in our view."

"Conversely, looking at the downside to current levels, we believe SKS, excluding a potential deal, would trade at 8.5x-9.5x forward EV/EBITDA, a modest premium to the US luxury retailers (JWN, COH, TIF) but at a discount to the Euro-based luxury brands (trading at ~11.5-12.0x)."

Deutsche Bank has a Hold rating on Saks Inc. with a modified price target of $14.00 (from $11).

For an analyst ratings summary and ratings history on Saks Inc. (NYSE: SKS) click here. For more ratings news on Saks Inc. click here.

Shares of Saks Inc. closed at $15.89 yesterday.

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