Pier 1 eyes Cost Plus
Offers $88.4M in stock for retailer
By Clint Engel -- Furniture Today, June 15, 2008
FORT WORTH, Texas — Pier I Imports wants to acquire fellow retailer Cost Plus in a stock swap valued at $88.4 million.
Pier 1 said last week 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 implies a value of $4 per share of Cost Plus stock, a 31% premium over the retailer's $3.05 closing price just before the bid was announced.
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.
With a number of securities analysts calling the move a distraction for Pier 1, which is working on its own recovery, the retailer's stock dropped more than 21% on the news but recovered some of the loss later in the week. By midweek, the stock was down about 17% from its $6.67 June 6 close.
Cost Plus' stock rose to $3.48 at midweek from its $3.05 June 6 close, for a gain of about 14%.
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, down from $1.13 billion and $1.5 billion, respectively, in the previous year.
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. That's down from an estimated $385 in furniture, bedding and accessories and $1.04 billion in total revenues the year before.
“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, which has more than 1,000 stores. “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.”
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 has a $450 million asset-based lending facility sufficient to provide operational liquidity for both companies.
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Pier 1 offers $88.4 million for Cost Plus
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