The owners of David’s Bridal are trying to find a suitor to tie the knot with its 62-year-old retail chain.
Private-equity shops Leonard Green & Partners and TPG Capital have put the retailer on the block and this week have taken first-round bids on the chain of 300-plus stores based in Conshohocken, Pa.
Several interested suitors, including private-equity firm KKR, have been told they have made it to the next round of the auction, according to a source close to the process.
Both Leonard Green and TPG had been hoping for a premium price for the only national wedding dress chain, but, according to sources, those dreams may be left at the altar.
Suitors are offering a price equal to about eight times EBITDA (earnings before interest, taxation, depreciation and amortization), or just under $1 billion, sources said. Unless the action picks up in subsequent bidding rounds, David’s Bridal, founded in 1950 in Ft. Lauderdale, Fla., will be a discount purchase.
By comparison, THL Partners this week agreed to pay a richer 10 times multiple for the Party City party supply chain. Like David’s Bridal, Party City is the only national retailer in its space.
Leonard Green and TPG yesterday also announced a deal to buy national for-profit thrift store Savers. The price: $1.6 billion.
That, too, is about a 10 times EBITDA multiple — 20 percent higher than the multiples being offered for David’s Bridal, sources said.
Both Party City and Savers are more down-market chains, which seems to indicate that David’s Bridal is carrying a middle-market discount.
“If you are down market, that is the place to be,” a banker who works with private-equity firms said.
Leonard Green has been moving David’s Bridal upmarket over the last couple of years in hopes of improving profits at the chain, whose stores are dotted across 45 states.
In April 2010, David’s Bridal announced an exclusive partnership with Vera Wang for gowns priced under $1,500.
Wang has been the go-to wedding dress designer for the power set for years and in recent years Avril Lavigne, Kim Kardashian and Ivanka Trump have all opted for a Wang gown for their big day.
While the Wang gowns at David’s didn’t carry the sky-high price tags of those used by the boldface name set, they did raise the average price of a gown at the chain and accomplish the goals of Leonard Green.
The average price paid for wedding dresses across the industry has risen from $1,056 in 2006 to $1,289 in 2011, according to Brides magazine.
The private-equity firms bought the bridal chain in early 2007 from Federated for $750 million.
If the firms put down cash equal to 33 percent of the purchase price, they stand to about double their money in the sale, a little over a 15 percent annual return. That’s a bit under par for a premier private-equity firm, but still not bad in a recession.
David’s Bridal has hired Bank of America to handle the auction.
Leonard Green did not return calls, and TPG declined comment.
