Dillard's Inc. Message Board

I think DDS should consider a management led LBO. Look at the numbers.

Public information I have says there are approximately 50 million shares of Class A stock outstanding. DDS management owns about 6.2 million shares, the DDS Retirement trust owns about 12.6 million shares. This leaves about 31.2 million shares in public hands. Management owns 99.4% of the Class B shares.

Assume a deal where a new Class C stock is swapped for the management owned Class B and the management owned Class A and the Retirement Trust class A shares. Cash would be paid to the other Class A holders.

Assume a price of $85 per share and the deal would need about $2.65 billion in debt. Free cash flow after cap ex is running about $400 million per year. In today's credit markets I am sure they could get 10 year money at 6%. Debt service cost would be $103 million per year after tax, leaving about $300 million in extra cash to amortize the principle. That is more than enough to repay the debt. The existing $11 million they pay in dividends could be used to pay dividends on the new Class C stock, resulting an increase in the dividend over what those swapping A an B class receive today. Given the real estate assets DDS owns that could secure the debt, banks should be more than willing to make this deal. This also assumes the existing debt stays in place.

I am sure that the Dillard boys figured out a long time ago that being a public company is a real pain in the back side so they should like this idea.

Just some arithmetic. Anybody have any thoughts?