By ANDREW ROSS SORKIN and MICHAEL BARBARO
The Jones Apparel Group is close to an agreement to sell Barneys New York, the fashionable clothing retailer, for about $825 million to the investment arm of the Dubai government, people involved in the talks said yesterday.
Barneys, whose flagship store, adorned with bright red awnings, is a Madison Avenue landmark, has become a beacon of style and a trophy for suitors. The proposed deal with Istithmar, the investment arm of Dubai, is in the final stages and could come early next week, these people said. Still, these people cautioned that the talks could collapse.
Jones Apparel, a clothing conglomerate that owns Anne Klein, Jones New York and Nine West, called off an auction of the entire company last year but had been quietly shopping Barneys, which carries top designers, like Helmut Lang and Marc Jacobs, and lesser-known labels like Lutz & Patmos and Rag & Bone.
The store has dressed New York’s elite shoppers, visiting diplomats and Hollywood celebrities for decades, supplying them with $10,000 gowns, $5,000 suits and $200 T-shirts.
A spokesman for Jones Apparel declined to comment. A spokesman for Istithmar could not be reached. Shares of Jones Apparel rose 31 cents yesterday to $29.20 a share after a report of the talks in The New York Post.
The deal would be a landmark for Istithmar, which has been steadily buying prominent properties in New York, including the Mandarin Oriental hotel in the Time Warner Center, but which has never owned such an upscale retail brand before. It also suggests that the courtship of the retail industry by investors has not abated. In the last several years, financial firms rather than retail rivals have bought nearly a dozen chains, including Lord & Taylor, Toys “R” Us, Neiman Marcus, Michaels Stores and Sports Authority.
Barneys — long coveted by financial barons, competitors and private equity groups — has weathered a series of ownership changes. In 1999, after it emerged from bankruptcy, Barneys fell under the control of two creditors, Whippoorwill Associates and Bay Harbour Management, both investment firms. In 2004, Jones Apparel, a mid-priced clothing company, surprised Wall Street by buying the luxury chain.
Ever since, speculation has become rife that the chief executive of Jones Apparel, the former investment banker Peter Boneparth, was searching for a buyer, hoping to cash in on a red-hot luxury clothing market, which has bolstered sales at Barneys, Neiman Marcus and Saks Fifth Avenue.
He appears to have done just that. Jones paid about $400 million, and is expected to sell it for more than twice that — a vindication, given that analysts questions the company’s value to Jones.
Barneys was founded by Barney Pressman in 1923 with money raised from the sale of his wife’s engagement ring. After it overexpanded, it filed for Chapter 11 in 1996.
Once the province of the ultra-rich, Barneys has become popularized in the last decade by its portrayal in shows like “Sex and the City,” whose main character, Carrie Bradshaw, treated it as a guilty pleasure.
Still, its Madison Avenue store attracts a who’s-who list of celebrities. Its restaurant, Fred’s, is a power-lunch spot for business executives and their wealthy spouses (Spotted there on a recent weekday: the “Today” show anchor Matt Lauer and Allen I. Questrom, the former chief executive of J. C. Penney).
Under Jones Apparel’s ownership, Barneys expanded into several cities, opening flagship stores in Boston and Dallas and its smaller, less expensive Co-Op formats in Houston; Troy, Mich.; Washington; and White Plains. Sales at Barneys stores open at least a year, a widely used measure in retailing, rose 10 percent, well above the industry average.