Professor
07-19-2007, 01:39 AM
Source: http://www.chicagotribune.com/news/local/chi-070718macys-story,1,317444.story?coll=chi-news-hed
Macy’s shares jump on report of KKR, Goldman buyout
By Cotten Timberlake
Bloomberg News
Published July 18, 2007, 4:46 PM CDT
Shares of Macy's Inc. jumped the most in 20 months after Women's Wear Daily reported that Kohlberg Kravis Roberts & Co. and Goldman Sachs Group Inc. plan to offer $24 billion for the department store chain.
The firms may propose paying $52 a share for Cincinnati- based Macy's, the newspaper said today. That would be 30 percent more than yesterday's closing price. Speculation about a buyout has been circulating for more than three weeks, boosting shares.
The stock rose $3.06, or 7.6 percent, to $43.09 at 4:01 p.m. in New York Stock Exchange composite trading. It was the biggest increase since November 2005.
Macy's sales growth slowed after it bought May Department Stores Co. in 2005 for $11 billion. Retailers have struggled this year as rising gasoline prices and mortgage payments discouraged shopping. Buyout firms may be attracted to Macy's cash and real estate holdings, analysts said. The company owns more than half its 858 stores.
"There is asset value there, so it is reasonable that private equity would be looking at it," said David Heupel, a fund manager for Minneapolis-based Thrivent Financial for Lutherans, which owns Macy's shares and manages more than $60 billion in assets.
Macy's spokesman Jim Sluzewski said the company doesn't comment on "rumors and speculation." KKR spokeswoman Molly Morse and Goldman spokesman Michael Duvally declined to comment.
Trading in call options, which give the right to buy the stock, rose to 110,568, at least five times the 20-day average. The volume of put options, giving the right to sell, rose fourfold. Calls outnumbered puts in trading today by more than 3-to-1.
The price of calls to buy the stock at $42.50 before July 21 increased sixfold to $1.65 as the stock rose above the strike price. The price of July $42.50 puts fell 65 percent to 90 cents.
Implied volatility rose to 53.63 percent, the highest in four years, from 43.74 percent. An increase in implied volatility indicates traders anticipate bigger swings in the stock price.
The risk of owning Macy's bonds jumped to a record, according to trading in credit-default swaps, which are used to bet on the company's ability to repay its debt.
Credit swaps tied to $10 million of Macy's bonds more than doubled to $190,000 from $93,000 yesterday, according to London- based CMA Datavision. An increase in the five-year contracts, which have almost quadrupled in the past month, signal deterioration in the perception of credit quality.
Macy's, which changed its name in June from Federated Department Stores Inc., converted more than 400 former May locations to its namesake chain in September.
Some analysts said a buyout might not be likely. Macy's filed for bankruptcy in 1990 after a debt-financed buyout by Campeau Corp. in 1988. It emerged from court protection in 1992.
"We think management would prefer to remain independent, rather than subject Macy's to the risks of a leveraged buy- out," Jason Asaeda, an analyst with Standard & Poor's Equity Research, wrote in a report today.
Asaeda, based in New York, rates the shares a "hold."
Macy’s shares jump on report of KKR, Goldman buyout
By Cotten Timberlake
Bloomberg News
Published July 18, 2007, 4:46 PM CDT
Shares of Macy's Inc. jumped the most in 20 months after Women's Wear Daily reported that Kohlberg Kravis Roberts & Co. and Goldman Sachs Group Inc. plan to offer $24 billion for the department store chain.
The firms may propose paying $52 a share for Cincinnati- based Macy's, the newspaper said today. That would be 30 percent more than yesterday's closing price. Speculation about a buyout has been circulating for more than three weeks, boosting shares.
The stock rose $3.06, or 7.6 percent, to $43.09 at 4:01 p.m. in New York Stock Exchange composite trading. It was the biggest increase since November 2005.
Macy's sales growth slowed after it bought May Department Stores Co. in 2005 for $11 billion. Retailers have struggled this year as rising gasoline prices and mortgage payments discouraged shopping. Buyout firms may be attracted to Macy's cash and real estate holdings, analysts said. The company owns more than half its 858 stores.
"There is asset value there, so it is reasonable that private equity would be looking at it," said David Heupel, a fund manager for Minneapolis-based Thrivent Financial for Lutherans, which owns Macy's shares and manages more than $60 billion in assets.
Macy's spokesman Jim Sluzewski said the company doesn't comment on "rumors and speculation." KKR spokeswoman Molly Morse and Goldman spokesman Michael Duvally declined to comment.
Trading in call options, which give the right to buy the stock, rose to 110,568, at least five times the 20-day average. The volume of put options, giving the right to sell, rose fourfold. Calls outnumbered puts in trading today by more than 3-to-1.
The price of calls to buy the stock at $42.50 before July 21 increased sixfold to $1.65 as the stock rose above the strike price. The price of July $42.50 puts fell 65 percent to 90 cents.
Implied volatility rose to 53.63 percent, the highest in four years, from 43.74 percent. An increase in implied volatility indicates traders anticipate bigger swings in the stock price.
The risk of owning Macy's bonds jumped to a record, according to trading in credit-default swaps, which are used to bet on the company's ability to repay its debt.
Credit swaps tied to $10 million of Macy's bonds more than doubled to $190,000 from $93,000 yesterday, according to London- based CMA Datavision. An increase in the five-year contracts, which have almost quadrupled in the past month, signal deterioration in the perception of credit quality.
Macy's, which changed its name in June from Federated Department Stores Inc., converted more than 400 former May locations to its namesake chain in September.
Some analysts said a buyout might not be likely. Macy's filed for bankruptcy in 1990 after a debt-financed buyout by Campeau Corp. in 1988. It emerged from court protection in 1992.
"We think management would prefer to remain independent, rather than subject Macy's to the risks of a leveraged buy- out," Jason Asaeda, an analyst with Standard & Poor's Equity Research, wrote in a report today.
Asaeda, based in New York, rates the shares a "hold."