Report: Fast Retailing in Talks to Buy J. Crew

Spring style at J. Crew

Spring style at J. Crew

New York and Tokyo—Although neither side has confirmed anything, the scuttlebutt in financial circles is that Fast Retailing, Asia’s biggest apparel retailer and owner of Uniqlo, is interested in acquiring J.Crew.

That follows speculation last week that J. Crew is looking to float an IPO. According to Reuters, One banker in Tokyo, who is not involved with Fast Retailing’s talks with J.Crew but knows Fast Retailing’s billionaire CEO Tadashi Yanai, says Yanai is looking at other brands, too.

Valuation Too High?

Evidently one of the chief stumbling blocks for Yanai is the reported $5 billion price tag for J. Crew, which is now owned by private equity firms, TPG and Leonard Green & Partners.

A $5 billion price tag implies a valuation of 17 times J.Crew’s enterprise value, including debt, over its earnings before interest, tax, before interest, tax, depreciation and amortization (EBITDA), reported Deutsche Securities analyst Takahiro Kazahaya.

Most retail mergers/acquisitions tend to be in the 7 to 8 times valuation, Kazahaya said.

For the year ended Feb. 1, J. Crew reported a 9% sales increase to more than $2.4 billion while EBITDA rose from $360 million to as much as $371 million.

“I would be unhappy if they bought the brand for $5 billion,” Kazahaya said.

“The timing of a deal couldn’t be better,” Kelly Tackett, an analyst at PlanetRetail, said “More important, the pairing of the two companies also would be a good cultural fit. Both share similar values, philosophies, and a passion for innovation.”

Sources have also reported that E. Land Group, the South Korean fashion conglomerate, is separately exploring a deal for J.Crew which E.Land has denied.

Buyout fund Advent International Corp is also interested in J.Crew, Bloomberg News reported.




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Jeff Prine

Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology.