Golden Gate Capital Considers Merging Eddie Bauer And Pacific Sunwear

The parent company of Eddie Bauer and Pacific Sunwear of California is considering a merger of the two retailers in an effort to consolidate stores, as well as survive a prolonged downturn in the American brick-and-mortar retail sector.

Citing sources familiar with the situation, CNBC reported that Eddie Bauer and Pacific Sunwear — who have both filed for bankruptcy in the past — are looking for ways to grow. In a merger, the companies could also bring their store counts down from their combined current total of nearly 700.

Both retailers are owned by private equity firm Golden Gate Capital, which has not decided whether to merge the two companies and has declined to comment. Eddie Bauer also declined to comment, while Pacific Sunwear could not be reached for comment.

According to sources, Washington-based Eddie Bauer hired investment banks last year to explore strategic alternatives, including a potential sale. The retailer, which specializes in outdoor gear and apparel, has a $218 million term loan and a $200 million revolving credit line. One source said that the company’s same-store sales are up 5 percent so far this year.

Golden Gate acquired Eddie Bauer out of bankruptcy protection in 2009 with a cash bid of $286 million.

For its part, California-based Pacific Sunwear emerged from bankruptcy in 2016 after Golden Gate reduced PacSun’s outstanding debt from $88 million to $30 million and invested about $20 million more into the company. It also emerged with a $100 million revolving line of credit from Wells Fargo.

“PacSun has successfully transitioned beyond its historical base of action sports brands to what we believe is the most relevant and coveted mix of brands celebrating the California lifestyle,” Josh Olshansky, Golden Gate Capital’s managing director, said at the time. “We believe in the future of the company, as reflected by our significant injection of new capital into the business.”

Pacific Sunwear has seen store sales rise 9 percent this year, one source revealed, adding that both Eddie Bauer and Pacific Sunwear saw a 6 percent increase in same-store sales in 2017.