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Gap reportedly hires Goldman Sachs Group

January 09, 2007|From Reuters

Gap Inc. has hired investment bank Goldman Sachs Group Inc., sources familiar with the matter said Monday, stoking investor hopes the struggling apparel retailer could be up for sale and sending its shares up as much as 11%.

The two sources said Gap, with a market capitalization of more than $15 billion, hired Goldman last month, but it was unclear exactly what the bank was hired to do.

A Gap spokesman said the company did not comment on rumor or speculation and added there had been a relationship with Goldman Sachs since 1995.

Goldman Sachs declined to comment.

San Francisco-based Gap, which operates the Old Navy and Banana Republic chains, as well as its namesake stores, has been the subject of much takeover speculation.

The company's shares are worth less than half of what they were in early 2000 and its management team, led by Chief Executive Paul Pressler, is under pressure to turn the company around.

Dogging the company has been declining sales at its two main brands, Gap and Old Navy, and the company last week said its management and board would be reviewing brand strategies at those chains.

That announcement spurred renewed speculation on Wall Street that the tenure of Pressler or other senior management might be at an end at the retailer, whose casual fashions have defined American style for more than 30 years.

"Strategic alternatives usually means the company is for sale," said Pacific Growth Equities analyst Christine Chen. "Or they could conceivably separate the segments.

"The stock is not expensive and there's value in the brand and there have been rumors that private equity firms could take it private."

Possible outcomes for Gap include a sale to a strategic buyer, a leveraged buyout, or spinning off Gap's brands, said Susquehanna Financial analyst Thomas Filandro.

He added that the Goldman Sachs news did not come as a surprise.

"Clearly this company is fighting an uphill battle," Filandro said.

Gap shares rose as much as 11% on Monday -- the largest one-day percentage gain in five years -- before closing up 7.3%, or $1.37, at $20.26.

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