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Lululemon (LULU): Is a private equity buyout a ‘stretch’?

Posted on July 21, 2014 by Chi Ip

Lululemon Athletica is an apparel company that specializes in clothing that appeals to those with a yoga-related lifestyle. A recent article in Bloomberg suggested that company may be seeking a buyout and listed some possibilities for companies that might be interested. Chief among those interested companies are VF Corp. (VFC) and Nike (NKE). Although a buy out has yet to be arranged, experts believe that shares of Lululemon Athletica would fetch a figure near $50 per share. The consensus seems to be that the company is very interested in selling, so any potential suitor would likely have to take it over in whole.

Lululemon Athletica receives its primary competition from other apparel brands that cater to an athletic, healthy consumer. These brands include Under Armour (also the subject of acquisition rumors) and Toms Shoes. When the company reported its earnings in the middle of June, it reported $0.34 earnings per share, which was slightly ahead of experts’ predictions. Because of rumors floating around that Lululemon Athletica might be purchased, shares of the stock have been trading up recently. When the market opened on July 16, 2014, shares of Lululemon Athletica were valued at $39.04 per share.

Sources:

http://www.fool.com/investing/general/2014/06/20/lululemon-athletica-caught-up-in-acquisition-rumor.aspx

http://www.bloomberg.com/news/2014-06-22/lululemon-under-pressure-from-founder-says-it-s-building-value.html

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