Since 2005, the luxury retailer Neiman Marcus has been owned by a private investment team. Eight years is a pretty long time for equity firms to hold on to their investments, and accordingly, TPG and Warburg Pincus LLC sought and recently found another group to take over ownership.
The $6 billion deal gave the equity firms a $1.1 billion return on their investment of $4.9 billion to buy Neiman less than a decade ago. Such a return might seem rather remarkable, especially considering the tumult that the luxury retailer underwent during the past decade or so—including surviving and suffering through the global economic crisis. The deal also meant that the equity investors could get their money out immediately, rather than waiting for Neiman Marcus to move forward in its reported plans to take the company public.
The new owners, Ares Management LLC and the Canada Pension Plan Investment Board, are private equity firms as well, but they appear ready to help Neiman get ready for its initial public offering. Ares already owns several retail chains, including Floor & Décor Outlets of America and the 99¢ Only Stores chain.
Critics of such secondary deals, in which equity firms sell their holdings to each other, complain that they offer insufficient transparency. Accordingly, there is little information available about the sale, other than the price. However, defenders of the practice note that private equity firms have an important role to play in making sure mergers and acquisitions—important drivers of economic growth—can take place.
Source: Mike Spector and Dana Cimilluca, “Investors Are Poised to Pay $6 Billion for Neiman,” The Wall Street Journal, September 8, 2013; Michael Wursthorn, “Warburg President Says Neiman Sale a Success,” The Wall Street Journal, September 26, 2013