Leveraged buyout of Gap unlikely -Esplanade

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NEW YORK (Reuters) - Investors looking for a leveraged buyout of Gap Inc. (GPS.N: Quote, Profile, Research, Stock Buzz) might be disappointed, the president of Esplanade Capital said on Tuesday, citing the apparel retailer's valuation and the need for a corporate makeover.

"We don't think it will be taken out" in an LBO, said Shawn Kravetz at the Reuters Investment Outlook 2007 Summit in New York. "The stock has rallied in expectation of a possible deal."

Shares in Gap have climbed about 11 percent year-to-date, but "everyone hated it until people started talking about all of the rumors," said Kravetz, whose hedge-fund specializes in consumer-related shares.

Equally important, Kravetz said that while private-equity investors often look for a turnaround story, stiff competition from other casual clothing retailers, most notably Japan's UNIQLO, makes the retail environment around Gap "harder for them, not easier."

"We want to own private Gap stores, but not at these prices," he added.

Buyout speculation has lingered for months around retailers such as BJ's Wholesale Club Inc. (BJ.N: Quote, Profile, Research, Stock Buzz), Barnes & Noble Inc. (BKS.N: Quote, Profile, Research, Stock Buzz), Borders Group Inc. (BGP.N: Quote, Profile, Research, Stock Buzz), as well as Gap.