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Target inks deal to sell Mervyn's

MINNEAPOLIS — Target Corporation has reached an agreement to sell its Mervyn's business unit to an investment consortium for approximately $1.65 billion in cash.

Mervyn's, based in the San Francisco Bay Area, has 257 stores in 13 states, primarily in the West and South. In 2003, Mervyn's generated $3.6 billion in revenue and $160 million in pretax segment profit. The company’s home textiles sales in 2003 were $340 million.

The buyer is an investment consortium including Sun Capital Partners, Inc., Cerberus Capital Management, L.P., Lubert-Adler/ Klaff and Partners, L.P. Additionally, Target Corporation will sell Mervyn's credit card receivables, totaling approximately $475 million, to GE Consumer Finance, a unit of General Electric Company. Mervyn's will continue to operate from its headquarters in Hayward, Calif., as an independent company.

The transaction is subject to regulatory approval and is expected to be completed shortly after approval is obtained. The sale is expected to result in an estimated gain in the range of $270 million pre-tax, or approximately 18 cents per share, in the third quarter.

Bob Ulrich, chairman and CEO of Target Corporation, said, "We believe that the sale of Mervyn's as an ongoing business reflects our long-term commitment to create substantial value for our shareholders over time and enhances the opportunity for all of our stakeholders, including our team members, guests and communities, to enjoy continued success for many years."

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