LNT Believes It Will Close Apollo Buyout
January 2, 2006,
Clifton, N.J. — As it neared the last hurdle potentially blocking the sale of the company, Linens 'n Things said it now expects to meet all the sales and profitability targets set by its prospective buyer, Apollo Management, as a condition for the $1.3 billion purchase of the home furnishings chain.
After the news emerged on Wednesday, Dec. 28, investors pushed the value of Linens' n Things' stock up 11.25 percent, or $2.69 a share, to $26.60. The stock continued to climb higher the following day, up another $0.37 a share, or 1.4 percent.
Coming off a vexing year, with profits and same-store sales weakening, Linens 'n Things announced seven weeks ago, on Nov. 8, that it had agreed to a sale to the Apollo group for $28.00 a share. But mindful of the risks, the retail chain's problematic history, and the vagaries of a treacherous retail environment, lenders who would bankroll the Apollo deal put a number of strings on the transaction.
Specifically, Linens 'n Things would be required to record an operating profit of at least $140 million for the 2005 fiscal year, and same-store sales that dropped no lower than six percent for the all-important Christmas quarter.
With high gas and home heating prices roiling the prospects for the Christmas quarter, and analysts fretting about several quarters of weakening sales and the challenge of competing with rival Bed Bath & Beyond, speculation had mounted in recent weeks that the retailer might not be able to get the deal done, or might have to settle for less than the original deal price of $28 a share.
Still hedging its bets somewhat, the retailer injected a cautionary note into the boiler-plate language that accompanied its federal filing setting a date for the shareholder vote. Profitability, it said, “continues to be subject to various uncertainties,” including a year-end audit and the results of its year-end physical inventory.
Analysts, however, seemed to applaud the news. After the news came out, broker Raymond James upgraded the stock to 'market perform, based on its confidence the deal will get done.
Related Content By Author
Live From New York: Fashion Comes Across the Pond
Home & Textiles Today eDaily
Most Viewed Articles
See the September 2017 issue of Home & Textiles Today. In this issue, we look at the Attack of the Killer Third Tier: Monster off-pricers are climbing to the top of the food chain, plus New Products: 40 pages of new products debuting at the New York Home Fashions Market; Home Stores: TJX unveils first U.S. HomeSense store; Clicks to Bricks: Boll & Branch moves from digital to physical retailing; and much more...