Who's Shopping for J. Crew?

Last Updated Jan 6, 2011 7:58 AM EST

When we last checked in with the preppy peddler and its head merchant prince, J. Crew (JCG) was waiting to see if any other potential buyers would make an offer beyond the $3 billion from private equity firm and former owner Texas Pacific Group Capital (TPG Capital). Guess who's rumored to be kicking J. Crew's tires now? Sears (SHLD) and Urban Outfitters (URBN).

Two other private equity firms are also taking a closer look, but not one of these companies is willing to confirm whether they'll place a bid yet.

This is no doubt a nail biting time for CEO Mickey Drexler and company who must consider counter offers through January 15th. The agreement with original bidders TPG and Leonard Green stipulates that J. Crew would have to fork over 1 percent of the purchase price (about $27 million) to them if it accepts a higher offer. Granted it's a paltry sum for a retailer who rang in revenues to the tune of over $430 million last quarter, but a sale to another retailer would make a considerable dent in the brand's pride.

It would be one thing to get scooped up by Glen Senk and crew over at Urban Outfitters. The two retailers overlap on several target markets (think hipster guys, chic office denizens) and Senk is in serious expansion mode. Snapping up J. Crew could only add cachet (and important knowledge base) to Urban's fledgling bridal venture and site-specific specialty shops. What's more, an acquisition could extend J. Crew's presence into overseas markets where Urban's got a strong foothold.

Drexler would probably bow out if Senk took over. Two lions wouldn't fit comfortably in the driver's seat. However, he'd probably beat an even hastier retreat if Sears were to place the winning bid. Everything about that scenario is wrong, from the potential clash of Sears' chairman Eddie Lampert and Drexler down to the very vibe of an ailing chain of discount department store laying its stodgy merchandising strategies over the stylish creativity of J. Crew's president Jenna Lyons.

J. Crew stock is currently trading at $44.01, higher than TPG's offer. It'll be interesting to see how the process unfolds in these final days of sale.