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Children’s Place Is Takeover Target Fit for an LBO: Real M&A
2015-03-13 17:36:50.269 GMT


(For a Real M&A column news alert: {SALT REALMNA <GO>}.)

By Brooke Sutherland
(Bloomberg) -- Private-equity funds may take their hunt for
retail buyout targets to the playground.
Children’s Place Inc., the $1.3 billion seller of clothing
for youngsters, jumped the most in more than three years
Thursday after a pair of activist investors called on it to
explore a sale. The company is a logical private-equity target
because it’s cheap, has little debt and is in the sweet spot of
less than $6 billion in enterprise value.
The company has already been implementing some of the
changes that Barington Capital Group and Macellum Advisors are
pushing for, including updating its antiquated allocation and
inventory-management systems and closing underperforming stores.
That process could be accelerated, which would help improve
Children’s Place’s lagging margins, said Susan Anderson of FBR &
Co.
“It definitely looks attractive from an LBO perspective,”
Anderson said in a phone interview. There’s still “low-hanging
fruit” for private-equity firms to profit from.
Children’s Place could fetch about $70-a-share based on
recent retail deals, a 20 percent premium to its average price
in the last month, said Oppenheimer Holdings Inc. Even after
this week’s gains, the Secaucus, New Jersey-based company trades
at a lower multiple of revenue than most other similar-sized
U.S. apparel retailers, according to data compiled by Bloomberg.
“The public market is not rewarding them for the largest
market-share positioning in the kid’s category in specialty, and
the operating-margin opportunity down the road,” Anna Andreeva,
a New York-based analyst at Oppenheimer, said in a phone
interview.
Children’s Place shares fell 2.2 percent on Friday to
$61.57 at 1:36 p.m. in New York after rising almost 9 percent on
March 12.

CEO Criticized

Barington and Macellum say that the discount is because of
investor concern over the company’s “deteriorating operating
performance since 2010 under the leadership” of Chief Executive
Officer Jane Elfers. The activist investors criticized
Children’s Place’s poor merchandising and inventory management
and questioned Elfers’ “managerial expertise.”
Norman Matthews, chairman of the board, said in a statement
that was read on the company’s earnings call Thursday that
Children’s Place appreciates constructive input from all
shareholders and will review the letter. He added in the
statement, which was read by Group Vice President of Finance Bob
Vill, that the board firmly believes Elfers “has done an
excellent job and is the right leader for our company.”

Some Progress

Children’s Place has been making progress on efforts to
improve itself. The company last year rolled out a new
enterprise resource-planning system to help it better manage the
business. The kids clothing retailer said Thursday that it was
increasing the number of planned store closures to 200 through
2017, up from a targeted 125 through next year.
Still, the changes are taking longer than most would have
hoped, Andreeva said. Children’s Place’s gross margin of 35
percent trails the median for U.S. specialty-apparel peers and
its operating margin is one of the lowest in the group.
“Children’s Place doesn’t have systems that other
retailers have used for, I want to say, 10 years,” she said in
a phone interview. “They’re very, very much behind the curve.”
A private-equity firm with retail expertise could boost
profitability by accelerating the upgrade and store closures,
and then increase growth by ramping up international expansion,
according to Andreeva. With little debt and a high free-cash-
flow yield, there’s plenty of room for a buyout firm to leverage
it up.
“They’re actually fixing the stuff that’s wrong with it
now so it’s not like it’s totally a broken story,” Anderson of
FBR said. The company could just use a bit of private-equity
help, she said.

For Related News and Information:
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PetSmart Activists Wave Cash Flow at Private Equity: Real M&A
Private-equity news: NI PE <GO>
Top deal news: DTOP <GO>
Real M&A column: NI REALMNA <GO>

To contact the reporter on this story:
Brooke Sutherland in New York at +1-212-617-0448 or
bsutherland7@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Elizabeth Wollman

Valeant Planning to Raise Its Bid for Salix Pharmaceuticals
2015-03-13 17:33:28.440 GMT


By DAVID GELLES
(New York Times) -- Valeant Pharmaceuticals is planning to
team up with Pershing Square Capital Management and other top
shareholders, including ValueAct Capital, to raise its bid for
Salix Pharmaceuticals this weekend, according to people briefed
on the matter.
The raised offer will be above $160 a share and consist
entirely of cash, these people said. The exact price of Valeant’s
new offer was not yet known.
Valeant hopes that the increased offer will be enough to end
a bidding war that has erupted over Salix, a maker of
gastrointestinal drugs.
Valeant agreed to buy Salix for $158 a share in cash, or
about $10 billion, last month. But earlier this week, the drug
giant Endo International offered $11.2 billion, or $175 a share,
mostly in stock, for Salix.
The Salix board is meeting on Saturday to consider the rival
offers, these people said.
While the Endo bid is higher, it also introduces several
uncertainties to the sale process for Salix. Among the top
concerns for analysts are the need for shareholder votes, a large
stock component and the results of a pending treatment approval
by the Food and Drug Administration.
Nonetheless, the Endo offer sent Salix shares trading
substantially higher, making it difficult for Valeant to stand by
its lower bid. Details of Valeant’s new bid were still coming
together on Friday afternoon.
To finance the increased offer, Valeant is turning to top
shareholders, including Pershing Square, the hedge fund run by
William A. Ackman. Pershing Square and Valeant worked closely
together for much of last year in an attempt to acquire Allergan,
them maker of Botox.
But Allergan was eventually acquired by Actavis, earning an
enormous profit for Mr. Ackman but leaving Valeant with little to
show for its efforts.
Then earlier this month, it emerged that Pershing Square had
taken a nearly 5 percent stake in Valeant but pledged to remain a
passive investor.
Acquiring Salix would be a much-needed victory for Valeant.
Speaking on CNBC on Friday, Mr. Ackman expressed confidence
in Valeant and its chief executive, J. Michael Pearson.
“I know Mike Pearson very well,” Mr. Ackman said. “I worked
with him for a year. He’s the most disciplined buyer of
companies. He’s not going to overpay for Salix.”
Mr. Ackman also suggested Salix shareholders would be wary
of taking so much Endo stock, compared with the cash being
offered by Valeant.
“In order for them to take the Endo transaction they have to
walk away from an all-cash deal,” Ackman said. “If you think
Valeant is getting it on the cheap, then you should buy Valeant
stock, which is what we did. We think Valeant stock is very
cheap.”
Other investors, including ValueAct Capital, another
activist hedge fund that is a big Valeant shareholder, are also
said to be helping finance the raised offer for Salix. It was not
immediately clear whether the hedge funds would simply lend money
to Valeant or use another mechanism to smooth the way for Valeant
to prevail in the bidding war.
Valeant is hesitant to take on more debt from banks because
it does not want to hurt its credit rating, people briefed on the
matter said.
Salix still hasn’t commented on the Endo offer, other to say
that it had received it and was reviewing it with its advisers.
Speaking at the Barclays Global Healthcare Conference on
Thursday, Endo’s chief executive, Rajiv De Silva, said he hoped
the bidding war over Salix would not last too long.
“We have no interest in a long drawn-out process,” Mr. De
Silva said. “We hope that this will be resolved quickly. This is,
I believe, in the best interest of the shareholders of all three
parties involved.”

Copyright 2015 The New York Times Company

-0- Mar/13/2015 17:33 GMT

Holcim Sees Special Div. as a Negative for Merged Company: UBS
2015-03-13 07:00:19.570 GMT


By Gaurav Panchal
(Bloomberg) -- Holcim believes special dividend for Holcim
shareholders would have negative impact on balance sheet of
merged company, UBS says following meeting with Holcim CFO
Thomas Aebischer at the UBS Investors’ Club yday night.
* UBS says following meeting that only adjustment factor is a
non-cash change in ratio
* Holcim pointed to 1:1 exchange ratio in merger agreement,
which has no adjustment mechanism: UBS
* Holcim said co. is “listening to shareholders” because
Holcim needs a 2/3 majority of its shareholders
attending EGM in order to approve the capital increase
needed to acquire Lafarge shares: UBS
* Holcim said co. is “listening to shareholders” because
Holcim needs a 2/3 majority of its shareholders
attending EGM in order to approve the capital increase
needed to acquire Lafarge shares: UBS</li></ul>
* Coming weeks should bring more clarity on whether the
exchange ratio will be adjusted, which requires re-
negotiation of the merger contract: UBS
* Probability of failure is low: UBS
* Current share prices imply a ~9% re-pricing given the
current trading of 1.09x HOLN/LG: UBS
* March 12: Holcim, Lafarge Said to Discuss Changing Terms for
Cement Merger Link


Link to Company News:{HOLN VX <Equity> CN <GO>}
Link to Company News:{LG FP <Equity> CN <GO>}

For Related News and Information:
First Word scrolling panel: {FIRST<GO>}
First Word newswire: {NH BFW<GO>}

To contact the reporter on this story:
Gaurav Panchal in London at +44-20-3525-0511 or
gpanchal2@bloomberg.net

To contact the editor responsible for this story:
Brian Lysaght at +44-20-3525-7908 or
blysaght@bloomberg.net