[ Starbucks on the prowl... I wonder if they could sweeten the deal ]
"Kitchenware Giant Rejects Takeover Bid"
Carol Emert, Chronicle Staff Writer Friday, June 25, 1999
Unlike its fancy blenders and armchairs, Williams-Sonoma Inc. apparently is not for sale.
The San Francisco kitchen and housewares merchant, which owns the Williams- Sonoma and Pottery Barn stores and catalogs, spurned a takeover offer in an emergency board meeting earlier this month, according to sources close to the retailer.
Company Chairman and Chief Executive Officer Howard Lester declined yesterday to discuss the situation, saying, ''Nothing is going on now. From time to time, people have discussions, but we don't comment on those.''
Williams-Sonoma is considered a ripe takeover target. It is a well-run company with a bright future on the Web and a relatively low valuation, said industry analysts.
With its stock trading at about $29, the company's current market capitalization is $1.62 billion. Bonnie Kramer Tonneson, an analyst with Hambrecht & Quist, values it at closer to $3 billion, or $41 per share.
Surprisingly, several sources named Starbucks Corp., the Seattle coffee giant, as the likely suitor. A Starbucks spokesman declined to comment.
Although Starbucks and Williams-Sonoma seem an odd match at first blush, it makes sense when their Internet strategies are factored in, said analysts and other observers.
Just last week, Starbucks announced a partnership with Oxygen Media to develop a lifestyle-oriented portal and cable television business targeting upscale women. Williams-Sonoma, which has just begun rolling out a series of cyber gift registries and online stores, would be the perfect e-commerce addition, observers said.
''The Starbucks customer is 55 percent women, well educated, over $75,000 median income, and over 70 percent of them use the Net,'' said Tonneson.
''It's the same people who shop at Williams-Sonoma and the ideal demographic for patronizing cooking and epicureal type stuff on the Web,'' Tonneson said.
In addition, Williams-Sonoma's larger stores would be good locales for small Starbucks coffee bars, observers said.
Williams-Sonoma is a particularly attractive Web partner because of its strong stable of brand names, including Hold Everything and Chambers; its decades of direct-to-consumer experience; and its technological infrastructure, which includes a strong Web operation and a large, sophisticated distribution center.
In addition, Williams-Sonoma's valuable customer database of 20 million names, addresses and buying histories will be an even more powerful tool when the company is able to mesh the list with e-mail addresses, said an industry analyst who declined to be identified by name.
So a lifestyle portal deal does make sense for Williams-Sonoma -- but the company decided to pursue just such an opportunity with a different set of partners, not Starbucks and Oxygen, last week.
Last Wednesday, just three days after the weekend board meeting at which Williams- Sonoma's directors voted to remain independent, the retailer announced that it is talking to CondeNet, an affiliate of Conde Nast magazines, about joining a CondeNet- Time Warner cable and Web business targeting high-income women. Williams-Sonoma has already arranged to start selling kitchen wares over CondeNet's Epicurious.com site.
So it looks like Williams-Sonoma will go it alone for now, although there is nothing to stop future bids. ''Something's going to happen there,'' said one industry executive. ''Eventually, somebody's going to have too much money to leave them alone.''
©1999 San Francisco Chronicle Page B1
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