Right to Privacy

Three years ago, at lunch with a group of executives from a sizeable family-owned supplier company, the patriarch of the business kicked things off with a provocative pair of questions: Is it bad to be big? Is it bad to be public?

In the home textiles world — and in parts of retailing — the answer increasingly appears to be “yes.”

If Linens 'n Things hits the financial targets required to seal the deal on its $1.3 billion acquisition by Apollo Management, it will become the first Top 10 retailer to operate as a private company.

Or will it? One could argue that Sears Holding — parent of Top 10 retailers Kmart and Sears — is essentially a private company. Although it remains publicly traded, its chairman owns a majority of the stock and feels no compelling reason to communicate with other shareholders or the Street.

Mervyn's, once part of publicly traded Target Corp., now operates privately thanks to a buy-out last year by an investment consortium led by Cerberus Capital Management.

On the supplier side, Springs Industries jumped the trend by going private in 2000. Although the Springs Global company that will result from the merger of most of Springs' business units with most of Coteminas's business units will be a publicly traded company, that entity will trade on the Brazilian exchange, not a stateside one.

In the past 12 months, fellow big mills Dan River and WestPoint International have both donned the veil of privacy. Each transaction recognizes that what's good for Wall Street isn't necessarily good for the organic demands of operating a business — particularly during turbulent times. Sure, Wall Street expects a business to make painful choices when necessary, but it will also drub that business quarter after quarter along the way.

With the exception of Springs, not one of the businesses mentioned earlier has used privacy to grow bigger. Sears Holding plans to jettison underperforming real estate and streamline headquarters staffing. Mervyn's is ditching 25 percent of its store base and recently announced that thousands of full-time workers will be converted to part-time status to unyoke the company from the obligation of paying their benefits.

Will a private LNT also cast off some stores? One of the co-investors in the deal is NRDC Real Estate Advisors. One assumes it's not putting up cash just to get an employee discount on towels.

That said, on the retail side of the business there are numerous examples of big companies that are thriving as public entities — Bed Bath & Beyond, Target and Williams-Sonoma among them.

But these days, operating publicly clearly isn't the right choice for all — at least not in this country. Hong Kong exchange, anyone?