Cinema Firm Halts Deal for Neiman Marcus

General Cinema Corp., which has a majority share in Neiman Marcus Group, called off a deal Monday to buy remaining stock in the specialty retailer less than a week after the offer was announced.

General Cinema said it took the action because a special committee of the Neiman Marcus board of directors had decided to withdraw its recommendation supporting the $14.40-a-share tender offer.

“There are no continuing negotiations,” said Peter Farwell, a spokesman for General Cinema.

The General Cinema decision to abandon the deal coincided with word that Mario Gabelli, a New York investor, was increasing a stake in Neiman Marcus.

Some Neiman Marcus shareholders had challenged the General Cinema deal, claiming that the price was too low. Harry Wells, a securities analyst with Adams Harkness & Hill in Boston, said the committee, which represented the interest of minority shareholders, likely “heard the howls” after the deal was announced.

He said it would not be surprising if General Cinema eventually made another offer.

Neiman Marcus stock was trading at $11.25 before General Cinema’s offer and closed Monday at $12.75, up $1.875. It had traded as high as $18.75 in the past year.

Dennis Block, a lawyer representing the committee, said he could not comment on the reason for withdrawing support. When asked if there was significant shareholder dissension, he said, “Not that we’re aware of.”

Neiman Marcus Group, a specialty retailer, currently has about 33.2 million shares of common stock outstanding, of which about 16.8 million are held by General Cinema.

General Cinema also holds an issue of convertible preferred stock in the specialty retailer which, if converted, would increase General Cinema’s total interest to about 60%.

General Cinema announced the deal last Tuesday, saying it had a large available pool of cash for buying the stock. Analysts said although the retail industry is sluggish, Neiman Marcus represents a good long-term investment.

In a filing with the Securities and Exchange Commission in Washington, a group of companies led by Gabelli said it had purchased 187,800 shares from Oct. 12 to Nov. 1 at prices ranging from $10.375 to $14.625 per share, bringing the group’s total stake to 2.137 million shares.

The Gabelli group gave no reason for boosting the stake.