Golden Gate Capital won the bankruptcy auction for the assets of Eddie Bauer, agreeing to pay $286 million in cash. That was enough to beat the Stalking Horse bid of $202 million put forth by CCMP Capital.

The high offer indicates that Golden Gate sees a lot of value in the branhad and its operations. In a press release, Eddie Bauer said that "The Golden Gate offer will maintain the substantial majority of Eddie Bauer's stores and employees in a newly formed going concern company. Pursuant to the purchase agreement Eddie Bauer gift cards will be honored in the ordinary course of business."

Without the huge debt load that drove the company into bankruptcy, Golden Gate is betting that it can turn Eddie Bauer around and make it a meaningful part of the fashion industry again.

Interestingly, this is not the first time Golden Gate has been involved with the company. In late 2006, Golden Gate teamed up with Sun Capital to offer $286 million in cash on top of $328 million in assumed debt -- but that offer was rejected by the companies shareholders, who are now kicking themselves. In effect, Golden Gate waited a few years and was able to get the company for the same price but without the encumbrance of a crushing debt load.

After filing for bankruptcy protection a month ago, Eddie Bauer Holdings Inc. (OTC: EBHIQ) is already seeing the suitors line up. Iconix Brand Group Inc. (NASDAQ: ICON), which owns Rocawear, is showing some interest. Hilco Consumer Capital and Gordon Brothers Group LLC are also looking to make a joint offer for the embattled clothing retailer, and Golden Gate Capital is said to be interested. Hudson Capital Partners LLC may throw its hat in the ring, as well.

Tomorrow's the bidding deadline, and there's an auction lined up for Eddie Bauer's assets on Thursday.

Already in the game, CCMP Capital Advisors ponied up $202 million in a "stalking horse bid," meaning that it will make the acquisition if nobody else beats its offer.

For now, Bauer's is living on borrowed time -- and cash. The company got court permission to take a loan for $100 million to keep the operation moving until an acquisition or auction is complete.

The private equity firms rumored to be eyeing Eddie Bauer have retail and apparel companies in their portfolios, which suggests a possibility that the company could be turned around with the right investment and management team. If not, I wonder if they'll sell the window decorations at the auction . . . always wanted my living room to look like a mall.

Back in March, I wrote with some skepticism about Eddie Bauer's (NASDAQ: EBHI) efforts at reinvention as a higher-end outdoor apparel company: "The problem for Eddie Bauer may be that it's too late: Years of eight- and nine-digit losses have hurt the company's balance sheet and the company currently has a negative tangible book value. With better-financed competitors like EMS, Eddie Bauer may have a hard time breaking through."

The continued weakening of the economy may have finally done Eddie Bauer in. Bloomberg reports that "The outdoor clothing retailer may seek bankruptcy protection as soon as this week, according to five people with knowledge of the discussions."

Faced with stock that is now sitting well under $1 per share, Eddie Bauer Holdings (NASDAQ: EBHI) announced that it was cutting its board of directors from ten members to seven and also slashing the payments directors receive.

In a press release, the company said that "In addition to reducing the size of the Board, the Board has adopted recommendations of the Compensation Committee to reduce the cash compensation payable to each Board member by approximately 50%, reduce the value of annual equity grants for Board service and defer the 2009 annual equity award for Board service."s

This is good news, but it's long overdue. According to the company's latest proxy statement, directors were paid $65,000 per year in cash in addition to $1,500 per meeting in 2007. But there were also generous stock and option awards that drove the non-employee director compensation well into the six figures. In 2007, Eddie Bauer spent over $2.3 million paying its non-employee directors. And while the stock price was much higher back then, it was still way below its level when the company went public in 2005.

Here's what's so crazy about that: As of today, Eddie Bauer has a market cap of just $21.6 million, meaning that it spent more than 10% of its current market cap paying its non-employee directors to go to a few meetings per year while the company was being driven into the ground.

Reducing the compensation of the board is a start. Replacing its members would be a better move.

It's been a very tough year for shareholders of Eddie Bauer (NASDAQ: EBHI). Back in December 2005, the stock was trading for about $23 a share. Now the company has decided to go private – at $9.25. The private equity investors include Sun Capital Partners and Golden Gate Capital.

The price certainly offers a measly premium for shareholders. In fact, the stock is up only 1.5% on the news.

Then again, Eddie Bauer is in the midst of a turnaround. Perhaps by going private the company can take the tough medicine it needs to fix things up.

Given the low price, might there be competing bids? Probably not. Keep in mind that when Eddie Bauer put the "for sale" sign on the company in May, there was very little interest among investors.

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates InvestorOffering.com.