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New York private equity firm eyeing bid for Belk

Belk department store at SouthPark mall.
Belk department store at SouthPark mall. ogaines@charlotteobserver.com

A New York private equity firm has emerged as a possible buyer for Charlotte-based retailer Belk.

Sycamore Partners is preparing to make an offer to buy the department store chain, a source told the Observer on Thursday. Belk indicated in April that it was considering a possible sale.

The offer could value the family-owned chain at $3 billion to $3.5 billion, including debt, making it the New York firm’s largest deal, according to Reuters, which first reported the possible deal Thursday.

Sycamore is finalizing financing for a possible purchase, and the Belk family is expected to make a decision about whether to sell the company this month, Reuters said. It’s still not clear whether a deal will go through given the valuation, the source told the Observer.

Industry experts in interviews with the Observer have said a private equity buyout was the most likely scenario for Belk. Equity firms typically take steps to make companies more profitable, including cutting costs, before selling them again or holding an initial public offering.

The largest family-owned department store chain in the U.S., Belk is controlled by a third generation of Belk family members, including CEO Tim Belk and his brother and Chief Operating Officer John Belk.

Representatives from both Belk and Sycamore Partners declined to comment.

In April, Belk, one of the Charlotte area’s biggest employers with 1,300 at its corporate offices, said it hired investment bank Goldman Sachs to help it evaluate options as part of a strategic planning process that is expected to take several months.

Other private equity firms that considered offers for Belk earlier, Reuters said, included TPG Capital LP, KKR & Co. LP, Bain Capital LLC and Golden Gate Capital.

Who is Sycamore?

Sycamore Partners specializes in consumer and retail investments and has more than $3.5 billion in capital under management, according to the firm’s website. Its strategy is to partner with management to improve profitability, the site says.

The firm has investments in retailers such as Aéropostale, Coldwater Creek, Hot Topic, Jones New York, Nine West Holdings and Talbots.

In May, Sycamore reached an agreement to buy 330 Family Dollar stores from the Matthews-based retailer, pending the completion of Family Dollar’s sale to Dollar Tree. Sycamore said it plans to operate those locations under the Dollar Express name.

Stefan Kaluzny and Peter Morrow co-founded Sycamore Partners in 2011, according to a 2013 New York Times profile. They had worked for Golden Gate Capital, a San Francisco-based private equity firm with retail holdings.

At Golden Gate, Kaluzny forged high-profile deals for clothing chain Express and jeweler Zale. Sycamore’s big transactions have included a $600 million acquisition of clothing store chain Hot Topic and a $400 million purchase of Talbots, the women’s wear chain.

Local retailers snapped up

Belk was founded in Monroe in 1888 by William Henry Belk, who named his first store New York Racket. It has 297 stores across 16 states, mostly in the Southeast.

The retailer has faced increasing challenges as consumers shift more to online shopping. If sold, Belk would be the latest of many family-owned department store chains to be purchased by larger companies.

No other Belk family members are listed among the top management at the company, and people familiar with the company have said there doesn’t appear to be a fourth generation of Belks being groomed to run the company.

Some of Charlotte’s best-known retail names have been snapped up in the past year. Matthews-based supermarket Harris Teeter was sold to Cincinnati-based Kroger, and Family Dollar’s sale to Chesapeake, Va.-based Dollar Tree is expected to close Monday.

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Twitter: @katieperalta

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