From The Street.com, kind of dated but still valid IMHO:
Herb, Part 1: Is Bradlees a Sitting Duck?
By Herb Greenberg
Senior Columnist
Originally posted at 6:31 AM ET 7/12/00 on RealMoney.com
Editor's note: This column has been updated with a response from Home Depot.
If you were reading the RealMoney.com Columnist Conversation Tuesday morning, you might've seen something along the lines of this from me:
Was visiting with a hedge fund manager Monday and we were talking about Bradlees (BRAD:Nasdaq - news), a longtime Target wannabe in the Northeast. The source was making his case that the real value in Bradlees isn't as an ongoing retailer, but its liquidation value. His premise is that Kohl's (KSS:NYSE - news), or someone else eager for stores in the real estate-challenged Northeast, would buy the company or its stores.
Now hear this: Tuesday morning PaineWebber analyst Aram Rubinson told his firm's sales force that Home Depot (HD:NYSE - news) is looking to snare a solid presence in the Northeast, and is interested in acquiring 30 Bradlees stores. Another analyst on the call then apparently mentioned that Kohl's could also be interested. Rubinson was traveling and didn't return my call, but I'm told this by a terrific source who was just relating what his PaineWebber salesman had told him. (That's pretty much how Wall Street works.)
The key issue, of course, is what Bradlees would be worth if it were sold for its leases, in which case its merchandise would have to be liquidated. The bottom-line valuation from my source, who is long Bradlees, is around $16.50 per share. That assumes leases averaging $3 million per store for 105 stores and the value of two distribution centers, plus the value of inventory and other assets minus cash liabilities. And he thinks that's conservative considering that Caldor, a now-defunct Target wannabe, was sold for an average price of $4.1 million per store.
One concern, which was raised by Jim Seymour (also on the Columnist Conversation) was that Bradlees might have some albatross leases that no retailer would want to get stuck with. That, however, isn't the case. According to my source, the company got rid of most if not all of its bad leases when it emerged from Chapter 11 bankruptcy last year.
A Bradlees spokesman declined comment, citing the company's policy of not commenting on speculation. A Home Depot spokesman, meanwhile, called very late last night (after this column and gave the old "We can't confirm or deny anything" line. He added, however, that to his knowledge Home Depot is not currently doing anything with Bradlees, but that "we rule out nothing." Officials of Kohl's and Target (we just called them because they are also interested in expanding into the Northeast) didn't return our calls |
