The challenges facing the Adrenalina bid

I’ve talked to several financial folks this morning to see if they think the bid by Adrenalina for PacSun is possible.

I’ll summarize what they said the challenges are:

Financing: At a time when credit conditions may be the tightest they have ever been, it will likely be difficult for Adrenalina to raise the $250 million to $300 million needed to purchase PacSun, analysts say.

Size: Adrenalina is small compared to PacSun. The company currently operates three stores. PacSun operates 938.

During the fiscal year ended December 31, 2007, Adrenalina had revenues of $3.3 million and incurred a net loss of $5.8 million. PacSun had $1.4 billion in net sales and net income of $39.6 million.

Valuation: Though the $4.50 offer is above PacSun’s trading price of $3.78 this morning, analysts said it doesn’t take into account the value of PacSun’s large stores base and retail infrastructure.

Bloomberg quoted an analyst along those lines. From the Bloomberg story:

“Amy Noblin, an analyst at Pali Research, was skeptical.

“We think this particular deal is unlikely to happen given the low price,’ she wrote in a research note Monday. Pacific Sunwear’s value is closer to $10 a share,” she said.