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The challenges facing the Adrenalina bid

By Tiffany Montgomery
October 20, 2008 9:25 AM

I've talked to several financial folks this morning to see if they think the bid by Adrenalina for PacSun is possible.


I'll summarize what they said the challenges are:


Financing: At a time when credit conditions may be the tightest they have ever been, it will likely be difficult for Adrenalina to raise the $250 million to $300 million needed to purchase PacSun, analysts say.


Size: Adrenalina is small compared to PacSun. The company currently operates three stores. PacSun operates 938.


During the fiscal year ended December 31, 2007, Adrenalina had revenues of $3.3 million and incurred a net loss of $5.8 million. PacSun had $1.4 billion in net sales and net income of $39.6 million.


Valuation: Though the $4.50 offer is above PacSun's trading price of $3.78 this morning, analysts said it doesn't take into account the value of PacSun's large stores base and retail infrastructure.


Bloomberg quoted an analyst along those lines. From the Bloomberg story:


"Amy Noblin, an analyst at Pali Research, was skeptical.

 

"We think this particular deal is unlikely to happen given the low price,' she wrote in a research note Monday. Pacific Sunwear's value is closer to $10 a share," she said.

 


More on: PacSun, bid, Adrenalina

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