FORT WORTH, Texas–Pier 1 Imports has sent a letter to the board of directors of Cost Plus proposing to buy its struggling competitor for approximately $88.4 million in common stock.
Pier 1 said the transaction could be completed in the third quarter of 2008.
The combined retailer would generate over $2 billion in annual sales and operate about 1,400 stores.
Pier 1 operates 1,100 stores with $1.4 billion in sales. Cost Plus operates 299 stores with $1.03 billion in sales.
Under the terms of the proposal, Pier 1 would buy Cost Plus in a strategic stock-for-stock transaction.
“We believe that the combination of Pier 1 Imports and Cost Plus is extremely compelling and would create significant value for the stakeholders of both companies,” Alex Smith, president and chief executive officer, said in a statement. He cited the retailers’ similar customer bases, business models and distinct market positions—both are emporiums of imported home goods—as commonalities.
In a letter to the board of directors of Cost Plus, Smith added, “While Pier 1 has made significant progress since its current management team was augmented in 2007, Cost Plus results have continued to deteriorate through multiple management changes to date. … Pier 1’s senior management team is well equipped to implement a speedy turnaround at Cost Plus.”
Based on the closing prices of Pier 1 and Cost Plus on June 6, the proposed exchange ratio implies a value of $4 for each share of Cost Plus common stock.
The offer reflects about 31 percent over the Cost Plus closing price on June 6.