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Outside groups look at Merry-Go-Round


Several investment groups are interested in buying a big ownership stake in Merry-Go-Round Enterprises Inc., PPTC development that could spark a bidding contest for the troubled fashion chain and complicate its bankruptcy reorganization.

No formal offers have been made; no money is on the table. One group, led by former Zale Corp. Chief Executive Dennis S. Bookshester, said that its interest is preliminary and that it won't move until it can examine Merry-Go-Round's books -- at Merry-Go-Round's expense.

As part of Mr. Bookshester's plan, Merry-Go-Round would start buying most of its apparel from a Singapore-based clothier that is part of the investment group.

One analyst said that outsiders often express interest in buying companies in bankruptcy proceedings. "Sometimes those expressions of interest turn into something serious. Sometimes they don't," said George Putnam, president of New Generation Research, a Boston firm that specializes in bankruptcy investing.

But Merry-Go-Round's stock jumped by 45 percent yesterday, to $2, as traders speculated that an alternative reorganization plan offered by Mr. Bookshester or some other party could boost the payout to the retailer's shareholders.

The approach of potential suitors "reconfirms what a lot of us have always thought -- that there's real value in this franchise," said one large creditor, who spoke on condition of anonymity.

But creditors, who get to vote on any reorganization plan, won't approve an outside takeover of Merry-Go-Round without good reason, he said. "No one's going to buy it from us unless they can pay us a price we accept," he said.

Last week, major shareholders and creditors agreed on their own reorganization plan -- one that would give three-fourths of Merry-Go-Round ownership to unsecured creditors and one-fourth to present stock owners.

Shareholder advisers for Merry-Go-Round yesterday portrayed Mr. Bookshester's approach as tentative, of questionable sincerity and of uncertain value for the retailer's stock and debt -- holders.

"We've already made our deal" with creditors, said Wilbur L. Ross, senior managing director of Rothschild Inc., a New York investment bank advising the shareholders' committee in Merry-Go-Round's bankruptcy case. "There's no reason in the world to think these people could make a better deal."

If the arrival of Mr. Bookshester's group is merely a way to extract investment-banking fees from Merry-Go-Round, "I'm not with them," said Stephen Selbst, a New York attorney representing the shareholders' committee.

Bookshester said yesterday that his group is "very serious" about possibly taking over Merry-Go-Round and using its 1,000 stores to sell apparel made by Wing/Tai Holdings Ltd. of Hong Kong and Singapore. "I wouldn't waste my time otherwise," he said.

Wing/Tai is part of the investment group, which is backed by New York investment bank Salomon Bros. Inc. It's unclear whether Merry-Go-Round's stores would keep their names, although under Mr. Bookshester's plan they would continue to aim at teens and young adults.

Mr. Bookshester, who said his advisers notified Merry-Go-Round on Tuesday of the group's interest, declined to discuss financing sources or disclose other details.

Mr. Bookshester spent six years at department store chain Carson Pirie Scott & Co., resigning as vice chairman in 1989. He had a brief tenure as chief executive of Zale's jeweler in 1990-91, before the chain entered bankruptcy proceedings.

He's not the only one eyeing Merry-Go-Round's 1,000 stores and its spacious, modern warehouse at its Joppa headquarters.

A company spokesman said yesterday that the retailer has received "several" expressions of interest from outsiders with alternative reorganization setups.

"The board is considering all of these and will be responding to them in due course," he said.

The identities of the other interested parties couldn't be determined yesterday.

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