Another Takeover Idea (PLCE)

The Gymboree Corporation

was acquired this morning for $1.8 billion or $65.40 in cash, a couple of weeks after the Wall Street Journal first reported that the company was putting itself up for sale. So if Gymboree could get acquired, at essentially a 50% premium to where shares were trading before the leak was first reported, then what's to stop GYMB's competitors from being acquired, as private equity obviously sees potential in this space. A quick look at Gymboree's competitors, shows one obvious name: The Children's Place Retail Stores, Inc.

. Like Gymboree, The Children's Place caters to the children's specialty apparel market. PLCE has apparel and related accessories for children from newborn to 10 years of age. Children's Place has better metrics than Gymboree, is growing at a faster rate, and is cheaper on an earnings basis. It is growing its revenues at 9% year over year, compared to the 3.4% that Gymboree was growing. It has over $7 in cash per share, and no debt, a private equity firm's dream. It has a better operating cash flow than Gymboree does, and shareholders have been rewarded for this, with shares up 50% on the year so far. That being said, I believe that shares are fully valued around $60, indicating a private equity firm could steal Children's Place for only a 10% or so premium, when looking at next year's earnings and own a tremendous franchise for years to come.