FORT WORTH, Texas--(BUSINESS WIRE)--Pier 1 Imports, Inc. (NYSE: PIR - News) today issued the following statement in response to the announcement by Cost Plus, Inc. (NASDAQ: CPWM - News) regarding Pier 1 Imports’ proposal to acquire all the outstanding shares of Cost Plus.“We are disappointed in the Cost Plus Board’s recommendation, which fails to recognize the significant value inherent in a combination of our two companies,” said Alex W. Smith, President and Chief Executive Officer of Pier 1 Imports. “Our strategic stock-for-stock proposal is extremely compelling, and we believe that it would create significant value for the stakeholders of both companies. We are surprised that the Cost Plus Board determined that our proposal was not in the best interests of the Cost Plus shareholders – given that the Cost Plus Board and management have made no effort to discuss with us the potential and benefits of a mutually acceptable transaction. In addition, as originally outlined, our proposal is subject to only limited conditions that are customary for transactions of this type, which are confirmatory due diligence, the negotiation of a definitive acquisition agreement and the receipt of all necessary shareholder and regulatory approvals. Nevertheless, we intend to work directly with the shareholders of Cost Plus to make this transaction a reality.”
Pier 1 Imports believes that its proposal provides full and fair value to Cost Plus shareholders and is compelling for many reasons, including:
Significant Synergies. Over the last year, management of Pier 1 Imports has achieved approximately $160 million in cost savings as a result of its efforts to reduce marketing expenses, payroll and other general administrative costs. Based on publicly available information, and Pier 1 Imports’ expectation of the benefits of a Pier 1 Imports-Cost Plus combination, Pier 1 Imports believes that it can achieve additional cost savings in the range of 5% of sales of Cost Plus (approximately $50 million), which is consistent with comparable retail transactions. Estimates of these potential cost synergies are anticipated to come from organizational efficiencies in the supply chain management, shared services, store operations and other general administrative costs. In addition, Pier 1 Imports believes its committed $450 million asset-based lending facility will provide the combined company sufficient operational liquidity to execute effectively, especially in this difficult retail environment. Compelling Upside of Combination. By virtue of Pier 1 Imports’ stock-for-stock transaction proposal, Cost Plus shareholders would have the opportunity to participate in the significant potential upside of the combined company. Pier 1 Imports and Cost Plus are highly complementary given their similar customer bases and broadly similar business models, but distinct market positions. The combination is expected to result in improvements in Cost Plus’ operating margins, providing an opportunity for Cost Plus shareholders not only to participate in the turnaround of Cost Plus’ business, but also to reap the benefits of a larger, more efficient company that has the potential to once again achieve the companies’ historically high operating margins. In addition, the combination would result in improved operational liquidity for Cost Plus, as well as a more liquid and active trading market for Cost Plus shares. Pier 1 Imports’ Solid Execution Track Record. Pier 1 Imports has made significant progress since its current management team was augmented in 2007, while Cost Plus results have continued to deteriorate through multiple management changes to date. As a result, Pier 1 Imports believes that the Cost Plus stock price has declined precipitously as it has struggled unsuccessfully to restructure its business. In contrast, the Pier 1 Imports stock has retained its value in the face of the same challenging environment. In fact, over the last six months, and prior to Pier 1 Imports’ proposal to acquire Cost Plus, the Pier 1 Imports stock price has appreciated 64.7%, while Cost Plus’ stock price has declined 13.1%. With experience operating multi-divisional companies, the Pier 1 Imports senior management team is well equipped to implement a speedy turnaround at Cost Plus.
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