Sunday, June 24, 2007

Barneys New York bought out by Dubai private equity

Jones Apparel Group (NYSE: JNY) announced Friday of its $825 million dollar sell off of its subsidiary Barneys New York to Dubai-based private equity group Istithmar. Focused more on the wholesaling, Jones Apparel said that although Barneys New York provided significant growth, the growth margins with regard to investment was not on par with the rest of its wholesaling business.

We see in Barneys a very nice growth asset. From our perspective...the asset required more capital investment to grow, [with the] operating margin not likely to approach [that of] our wholesale business as we go forward - Peter Boneparth, CEO Jones Apparel
Returning to its beginnings in wholesaling and mid-level luxury, Boneparth noted that Jones Apparel's short stint in Luxury-end fashion was too far outside of the company's spectrum, however he noted the opportunity for producing a great shareholder return to investors.
We didn't buy [Barneys] with the intent to sell it, but this is a great opportunity for shareholder return. - Boneparth
Due to tax benefits, Jones Apparel will make approximately $290 million from the sale, with net proceeds after taxes and transaction fees being close to $770 million.

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