By ANDREW ROSS SORKIN and TRACIE ROZHON
Neiman Marcus, the luxury retail chain that owns Bergdorf Goodman, has agreed to be sold for about $5 billion to a group of financiers with experience in the retail industry, executives close to the negotiations said last night.
The sale of Neiman, known for an extravagant Christmas gift catalog that features items like $400,000 his-and-hers robots, comes as a host of mergers and acquisitions are reshaping the retailing industry. Buoyed by intense interest by financiers flush with cash, dozens of storied retail names are now being tossed about as takeover targets on Seventh Avenue.
A formal announcement of the deal is set for today, the executives said. The buyers are the Texas Pacific Group, a firm that recently turned around J. Crew and also owns Burger King, and Warburg Pincus, another private equity firm, the executives said.
Neiman, which has 37 stores across the nation and owns fashion brands like Kate Spade, is the gold standard for the retailing industry and has set the pace for other luxury retailers.
As many department stores moved downscale, trying to compete with fast-growing discounters like Kohl's and Target, Neiman successfully took the opposite path: jettisoning much of its moderately priced merchandise and moving even more upscale.
"They embraced luxury goods not only in men's and women's apparel, but in jewelry and accessories as well," said Alexander Vreeland, a former executive at Giorgio Armani and now president of GAV, which designs and produces clothes for Calvin Klein. "Their Gucci, Prada and Armani franchises are enormous."
For Texas Pacific and Warburg, the attraction of Neiman is its loyal and affluent customer base. Perhaps more important, the firms are making an enormous bet on what they see as demographic trends that point to the very rich getting even richer. The firms plan to expand by increasing the number of Neiman stores, opening in places like Seattle, for example, a city with an affluent audience that has never had a Neiman store, the executives said.
The firms may also consider expanding the number of Bergdorf Goodman stores, inspiration for "Bergdorf Blondes," a best-selling chronicle of the Upper East Side elite.
Bergdorf currently has only two stores in the country, a men's store and a women's store in Midtown Manhattan.
For the buyers, the big test is aggressively maintaining the upscale push as it tries to compete with increasingly competitive rivals.
"The challenge is going to be to have significant growth and not dilute the unique cachet of Neiman Marcus," Mr. Vreeland said.
Burton M. Tansky, who has led the company through its recent renaissance, will continue to run the company, the executives said.
Under Mr. Tansky, even during weaker periods in the industry, Neiman's customer has remained amazingly faithful. "She may buy less," he said recently, referring to the typical customer during the retailing weakness of the late 1990's, "but she never deserted us."
Texas Pacific knows the retail game, most visibly through its acquisition of J. Crew, which the firm purchased about two years ago.
Under the terms of the deal, the firms will pay $100 a share for Neiman, the executives said. Shares of Neiman closed at $98.32 on Friday.
A spokeswoman for Neiman could not be reached for comment. A spokesman for the private equity firms declined to comment.
Texas Pacific and Warburg beat out rival offers from a group composed of Kohlberg, Kravis Roberts & Company and Bain Capital, which recently acquired Toys "R" Us, and another bid from Thomas H. Lee and the Blackstone Group.
Before the deal is completed, Neiman is expected to sell its private label credit card business, the executives said. That business, which has already received offers from buyers like American Express and Citigroup, is expected to sell for more than $500 million.
The deal is being financed by Deutsche Bank and Credit Suisse First Boston. Neiman was advised by Goldman Sachs and J.P. Morgan and received legal advice from Simpson Thacher & Bartlett.
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