Abercrombie & Fitch shares jump 9 percent on reports of bid from American Eagle, Cerberus

Key Points
  • American Eagle is working with Cerberus Capital Management on a bid for Abercrombie & Fitch, sources have told the Wall Street Journal.
  • A deal for Abercrombie could be finalized within about a month, the sources told the paper.
  • Shares of both Abercrombie and American Eagle traded higher Wednesday on the report.
An Abercrombie & Fitch store in San Francisco.
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Teen clothing retailer American Eagle Outfitters is working with private equity firm Cerberus Capital Management on a bid for Abercrombie & Fitch, sources familiar with the matter have told the Wall Street Journal.

This news comes after Abercrombie confirmed to CNBC earlier this month that it was in preliminary discussions with several interested buyers. At the time, clothing retailer Express was believed to be interested in making an offer for the company, in addition to American Eagle.

A number of parties, including other buyout firms and Express, are still involved in the bidding process, the Journal reported.

Shares of Abercrombie traded 9 percent higher on this news Wednesday afternoon, after briefly being halted. Meanwhile, shares of rival American Eagle also rose, trading up about 3 percent.

American Eagle, Abercrombie and Cerberus all declined to comment. Representatives from Express were not immediately available for comment.

"There can be no assurance these discussions will lead to a definitive agreement or that a transaction will be consummated," Abercrombie had written in a statement in early May, responding to speculation about potential bidders.

Now, sources tell the Journal that a deal for Abercrombie could be struck within about a month.

Abercrombie is set to report first-quarter earnings before the bell on Thursday.

The teen clothing retailer was reportedly evaluating its latest takeover interest with the help of investment bank Perella Weinberg Partners, sources had told Reuters.

As the Abercrombie brand has fought to stay on top of ever-changing fashion trends, the company's shares sat at a 17-year low before takeover reports began surfacing in early May.

Cerberus, which has more than $30 billion under management, is known for investing in well-known brands that have started to struggle. It recently took a stake in Avon Products, for example, buying up most of the embattled makeup seller's North American business.

American Eagle's sales have been climbing ahead of Abercrombie's lately. Its market capitalization of roughly $2 billion is more than twice that of Abercrombie's.

Shares of Abercrombie's stock have tumbled more than 40 percent over the past 12 months, but the stock is up nearly 10 percent for the year-to-date period, including Wednesday's gains.

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