Bankrupt apparel retailer Brooks Brothers announced that it is set to be bought up by Authentic Brands and Simon Property-led Sparc Group after the bidders increased their purchase offer to $325 million.
Brooks Brothers said that Authentic Brands and the Simon Property-led group (SPG) were selected as the winning bidders in the sale process after they ramped up their offer to $325 million from a previous $305 million. As part of the offer, the bidders will purchase the vast majority of Brooks Brothers’ global business operations as a going concern, as well as its intellectual property portfolio. They will also commit to continue to operate at least 125 of its retail stores and intend to preserve the iconic Brooks Brothers brand.
The clothing retailer, which has 200 stores in North America and 500 worldwide, filed for bankruptcy proceedings on July 8. Sparc, an operator of lifestyle brands including Aéropostale and Nautica, is owned by Authentic Brands Group and Simon Property Group.
The proposed transaction is subject to court approval and the satisfaction of customary closing conditions, including regulatory approval. The hearing to approve the sale is currently scheduled for August 14. Provided closing conditions are met, the transaction is expected to be completed by the end of this month.
Simon Property shares have been hit hard losing 55% of their value so far this year. Looking ahead, the $88.14 average analyst price target implies more than 31% upside potential over the coming year.
Last month, BMO Capital analyst Jeremy Metz downgraded Simon Property to Hold from Buy.
“We see SPG as a winner, and consolidator, in the long term given its high-quality portfolio, management team, track record, and A-rated balance sheet,” Metz wrote in a note to investors. “However, despite the attractive valuation and +5% dividend yield, with lingering closing pressures subduing earnings growth, we think upside could be limited in the near term until headline pressures ease and a path to better growth emerges.”
Overall, Wall Street analysts have a cautiously optimistic outlook on the stock. The Moderate Buy consensus shows 4 Buys versus 5 Holds. (See SPG stock analysis on TipRanks)
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