Britain's CVC Capital Partners Ltd and New York-based KKR & Co are negotiating to acquire the US-based chain of luxury department stores Neiman Marcus. Talks are believed to be at an early stage and may yet be cancelled.
A Bloomberg report, drawing on information from anonymous sources, said the stores' owners, private equity firms TGP Capital and Warburg Pincus, filed for an initial public offering (IPO) in June. However, the expectation is that selling may provide a quicker exit.
Bloomberg's anonymous source adds pricing could affect the deal, as private equity firms are reluctant to pay more than nine times the company's earnings before interest, taxes, depreciation and amortisation (EBITDA).
Given Neiman's adjusted EBITDA of $623m (£401.2m, €466m) from last year, the price could be approximately $5.6bn. However, in May sources said TGP Capital and Warburg Pincus were expecting as much as $8bn.
In either case, a private equity firm is likely to seek a partner for the equity portion of the deal. Neiman Marcus, Warburg, TPG, CVC and KKR have refused to comment on the matter.
Neiman Marcus has 41 stores across the US and earned $4.5bn in revenue in the last fiscal year to April. However, since the credit crisis, Neiman Marcus has failed to improve revenues.
According to Bain & Co estimates, US consumer spending on luxury items climbed 5% on a constant-currency basis in 2012, less than half the 13% gain the previous year.
Meanwhile, Warburg Pincus has been linked with the sale of Mergermarket, publishing giant Pearson's financial information unit.