Thursday, September 22, 2011

Big Lots at Half-Price Signals 50% Markup

For buyout firms looking for a deal, Big Lots Inc. (BIG) is now offering the biggest bargain among discount retailers in America.

Big Lots at Half-Price Signals 50% Markup in Cheapest Retail LBO: Real M&A

Big Lots, which sells discontinued and overstocked brand name goods, trades at 13.9 times its so-called free cash flow, according to data compiled by Bloomberg. That’s the cheapest among its closest rivals and half the industry median. As private equity firms circle 99 Cents Only Stores (NDN) and Family Dollar Stores Inc. (FDO), a buyer could pay a 50 percent premium for Big Lots and still get the Columbus, Ohio-based retailer at a lower price than any of its competitors, the data show.

Selling Big Lots would help Chief Executive Officer Steve Fishman hand owners a billion-dollar windfall after retailers returned 10 times as much in the past three years. While Big Lots had hired Goldman Sachs Group Inc. to explore options, the stock plunged 26 percent since its April high as a sale failed to materialize. The slide has made Big Lots even more affordable now to private-equity buyers, Telsey Advisory Group LLC said.

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