Apollo goes shopping

Continued retail industry consolidation has resulted in yet another private equity grab of a well-known store. Cincinnati-based Federated Department Stores, the second-largest US department store operator, has agreed to sell the Lord & Taylor chain to NRDC Equity Partners for $1.2 billion (€1.0 billion). NRDC is a partnership between principals of Apollo Real Estate Advisors and National Realty & Development Corp.

Lord & Taylor's flagship store on New York's 5th Avenue is part of the deal, and many have speculated that Apollo could be planning to sell this valuable piece of real estate or convert it to another use. Representatives for Apollo declined to comment on the transaction. However in an interview with The New York Times, NRDC president Richard Baker said the firm plans to continue operating all of the chain's 50 stores, including the one on 5th Avenue. With its prime location, the store is worth an estimated $300 million to $400 million. Baker did say that the firm will likely be reducing the size of the main location, which is about triple the size of an average Lord & Taylor store.

The 180-year-old New York department store chain had sales of $1.6 billion in 2004. Federated, which also owns Bloomingdale's, Macy's and Filene's, acquired Lord & Taylor when it bought May Department Stores last year for $11 billion. The company says it is divesting Lord & Taylor because it is looking to concentrate on the Macy's brand, converting about 400 May properties into Macy's stores. Federated is also trying to sell more than 760 bridal and footwear stores.

As the retail industry undergoes consolidation, private equity firms have become increasingly active in the sector. In October, Texas Pacific Group and Warburg Pincus acquired Neiman Marcus, financing the $5.1 billion deal with a 35 percent equity stake. In December, Apax Partners took Tommy Hilfiger private for $1.6 billion. For its part, NRDC acquired Linens & Things in February, and has also placed bids in the past for Toys ‘R’ Us (alongside Apollo), the Pathmark grocery store chain and Burlington Coat Factory.