Pier 1 offers $88.4 million for Cost Plus
Deal would represent 31% premium on stock price
Clint Engel -- Furniture Today -- Home Accents Today, 6/10/2008 8:08:00 AM
Pier 1 Imports wants to acquire fellow retailer Cost Plus in a stock swap valued at $88.4 million.
Pier 1 said it would issue 0.6 shares of its common stock for each share of Cost Plus stock in a deal it said could be completed in the third quarter. The exchange ratio of the offering implies a value of $4 per share of Cost Plus stock, a 31% premium over the retailer’s $3.05 closing price Friday.
Oakland, Calif.-based Cost Plus, operator of 292 Cost Plus World Market stores in 33 states, said it is reviewing the “non-binding, highly conditional proposal” from Fort Worth, Texas-based Pier 1.
“We believe that the combination of Pier 1 Imports and Cost Plus is extremely compelling and would create significant value for the stakeholders of both companies,” said Alex Smith, president and CEO of Pier 1, a Top 100 company with more than 1,000 stores that has been working on its own turnaround.
“Given our similar customer bases and broadly similar business models, but distinct market positions, we believe Cost Plus is an excellent fit with Pier 1 Imports,” Smith said.
He added that the combination would “create a stronger and more competitive company that is better positioned for future growth.” It would result in improvements in Cost Plus’s operating margins and synergies from greater efficiencies in “supply chain management, shared services, store operations and other general administrative costs,” Smith said.
“Given our track record of execution and our sound financial condition, we are confident that our management team can deliver long-term growth and profitability to shareholders of the combined company,” he said.
In a letter to shareholders of both companies, included in a press release on the offer, Pier 1 said, “Absent a transaction, Cost Plus is likely to face increasing liquidity problems,” while Pier 1 is in sound financial condition with a $450 million asset-based lending facility sufficient to provide operational liquidity for both companies.
Ranked No. 8 on Furniture/Today’s Top 100, Pier 1 had estimated furniture, bedding and accessories sales of $1.08 billion in its fiscal year ended March 1 and total revenues of $1.37 billion. Cost Plus, ranked No. 24, had an estimated $375 million in furniture, bedding and accessories sales and total revenues of $1.02 billion in its fiscal year ended Feb. 2.
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