Dubai Firm Wins Barneys Bidding War

Chris Shott — Thu, 09 Aug 2007 11:54:30 -0400

In the early hours of this morning, the Japanese retailer Fast Retailing declined to match a competing bid to buy Barneys New York, paving the way for the Dubai firm of Istithmar to proceed with its purchase of the chain of fancy stores from Jones Apparel Group.

Fast Retailing, which is known in the United States for its cheap-chic clothing store Uniqlo, announced early this morning that they would not attempt to match Istithmar's $942.3 million offer to buy Barneys.

"We won't make another proposal," Fast Retailing spokesman Takashi Igarashi told Bloomberg in a phone interview.

The Japanese firm had until 5 p.m. on Thursday to make one last pitch for Barneys.

With seven hours left to go until the sale became official, Istithmar CEO David Jackson refused to accept victory so soon. "We still have a lot of clock watching to do," Mr. Jackson told The Observer, declining further comment until 5:01 p.m. today.

Istithmar--which means "investment" in Arabic--is controlled by the ruling family of the tiny sheikhdom of Dubai. That city has staked its future on large developments, including the world's tallest tower, the Burj Dubai, which is supposed to be finished in 2008, and a hotel and apartment tower by Donald Trump.

Perhaps, then, ownership of such a trendy, higher-end brand like Barneys fits in smoothly with the ruling family's present course of bigger, flashier, better.

The bid-up for Barneys certainly shows how coveted it was. As Bloomberg reported:

Jones agreed in June to sell Barneys to Istithmar for $825 million. Two weeks later, Fast Retailing offered $900 million, which Istithmar matched Aug. 5. Later that day, Fast Retailing countered with a higher bid of $950 million.

So how did Istithmar beat that with a $942.3 million bid? Since Istithmar had the original deal with Jones, Barneys is liable for a termination fee if they go with Fast Retailing, meaning Fast Retailing's number has to be higher by some millions to beat an Istithmar number.

As part of its latest bid, Istithmar also raised the termination fee from $22.7 million to $34.7 million.

Istithmar's plans? According to Bloomberg:

Istithmar may add to the seven Barneys locations, which sell Helmut Lang clothes and Fendi handbags, according to Jeffrey Bloomberg, a principal with financial advisory firm Gordon Brothers Group LLC.

Istithmar said in February that it will spend $1.7 billion this year buying retail, industrial and financial-services companies. Since 2003, the firm has acquired New York properties including the W Hotel Union Square and a $1 billion stake in London-based bank Standard Chartered Plc.

UPDATE: At 5:31 p.m., Jones Apparel announced that Fast Retailing's counter-proposal time was officially up. "As such, Jones is moving forward with the sale of Barneys to affiliates of Istithmar PJSC," according to a statement.

But who really came out on top? "The winner is Jones!" declared deposed Barneys heir Gene Pressman, grandson of company founder Barney Pressman, in an email to The Observer on Thursday.

"Seeing [that money] go into somebody else’s pocket instead of my family’s is a little annoying," said Mr. Pressman, whose family lost control of the company amid bankruptcy proceedings in 1999, during a previous interview.

UPDATE: At 5:51 p.m., Istithmar finally announced victory.

"Securing Barneys is indeed a major win for Istithmar," said CEO Mr. Jackson, who attributed the outcome to Istithmar's "laser-sharp focus on this deal."

Executive Chairman H. E. Sultan Ahmed Bin Sulayem called Barneys "a unique global asset with incredible growth prospects within the luxury market."

"We intend to grow the company in the US and in international markets," he said.

Observer » Dubai Firm Wins Barneys Bidding War

Dubai Firm Wins Barneys Bidding War