Bridal Group Auction Drags On

Target: Federated Department Store’s Bridal Group

Likely Sponsor: Leonard Green & Co.

Purchase Price: $600M—$1B

Seller: Federated Department Stores

Target’s Time At Auction: 14 Months

Financial Advisors: Seller: Credit Suisse, Banc of America Securities

In an era when general partners are tripping over one another to get a crack at their next investment opportunity, it’s surprising how long some auctions can take—especially when a well-known brand is involved. Case in point: the Bridal Group of Federated Department Stores, which includes 254 “David’s Bridal,” 454 “After Hours Formalwear” and 11 “Pricilla of Boston” stores located in 47 states and Puerto Rico. Federated announced its intentions to sell the Philadelphia-based division on Sept. 20, 2005 and, with the exception of month-old reports indicating that Los Angeles buyout firm Leonard Green & Partners is nearing a deal, nothing has materialized.“We expect to thoroughly evaluate strategic alternatives and expect to complete a sale of this business some time in 2006,” Federated Chairman and CEO Terry Lundgren said in his original statement announcing the divestment plan. That timeline has almost run out.Perhaps the lag has something to do with valuation. Various early news reports note that Federated initially was looking to clear the entire Bridal Group in a transaction valued at about $1.5 billion. Now, however, after nearly 14 months on the block, it appears that the Bridal Group is slated to fetch only between $600 million and $1 billion, with the lower end more likely, reports say.Initially the process appeared to be moving along at a good clip, with the typical mix of strategic and financial buyers sniffing around the Credit Suisse (then Credit Suisse First Boston) and Banc of America Securities LLC-run auction. Buyout shops Apollo Management, Bain Capital, The Carlyle Group, Kohlberg Kravis Roberts & Co., Leonard Green, Oak Hill Capital, Thomas H Lee Capital and Warburg Pincus have each been named in various accounts as one-time suitors of the wedding-wear division.The Men’s Wearhouse, which has seen an increase in revenue from its own homegrown tuxedo rental business, also was rumored to have been interested. Additionally, the Bridal Group’s own President and CEO, Robert Huth, reportedly had been attempting to cobble together a management-led buyout.Certainly there is money to be made in the wedding market, which Minneapolis-based financial advisory firm The Mercanti Group describes as a $100 billion industry. In a recent report issued by the firm, Mercanti Principal Dave Remick predicts that the wedding industry will continue to generate “compelling year-over-year growth” to the tune of 20% or more for the next 20 to 25 years, as the country’s largest generation since the baby boomers approaches marital age. According to the report, more than 44,000 weddings are held each weekend in the U.S., or 2.3 million per year.Despite the industry’s growth, pure wedding plays are not common in the buyout world. However, there are firms that have dabbled in its peripheries. For instance, Gryphon Investors in 1999 formed tuxedo rental company The Gingiss Group when it merged its two portfolio companies, Gary’s Tux Shops and Gingiss Formalwear. Ironically, in 2003 Gryphon sold The Gingiss Group to the Bridal Group of May Department Stores, which in turn was acquired by Federated Department Stores, which is now trying to sell off the division.Calls to Leonard Green & Partners, Federated Department Stores, Credit Suisse and Banc of America Securities were not returned by press time.—A.N.