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Can KKR dance the Saks two-step?

May 23, 2013: 10:58 AM ET

<> on March 3, 2009 in Chicago, Illinois.Merging Saks with Neiman Marcus may make sense, but it won't be easy.

FORTUNE -- Kohlberg Kravis Roberts (KKR) reportedly is considering a massive luxury retail consolidation move: Buying both Saks Inc. (which just went on the block) and Neiman Marcus (being sold by a PE group that includes TPG, Warburg Pincus, Leonard Green and Credit Suisse) -- and then merging the two companies together.

To be sure, there are some good business arguments for such a move. For example, a Citi research note points out that the two companies have some overlapping stores that drive down performance at each, and also that the combined company could have greater leverage over suppliers. And KKR may be able to mitigate the high asking price for Saks (SKS) – its current trades are around the same EBITDA multiple paid for Neiman Marcus, so a premium would be rich -- by doing sale-leaseback transactions on its some of its underlying real estate assets.

The bigger question may be one of logistics.

Neiman Marcus shareholders originally began laying IPO groundwork last summer, and also appear to have been contemplating a parallel sale process. In other words, Neiman Marcus should be further along than Saks – a timeline issue exacerbated by the fact that it private-to-private deals like Neiman Marcus are usually easier/faster to complete than are public-to-private deals like Saks.

Would KKR make the completion of Saks (or at least shareholder approval) a precondition to closing Neiman Marcus? And, if so, would Neiman's private equity owners be willing to wait? Or does KKR have a model where Neiman Marcus can produce adequate returns on its own, with Saks serving as gravy?

Not saying that such a two-step can't be done, but it could be a tricky manuever.

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Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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