After years spent divesting assets, Leslie H. Wexner surprised Wall Street late Wednesday with the $628 million acquisition of Canadian lingerie retailer La Senza.
The deal reinforces one of the areas Wexner sees as the future of Limited Brands — innerwear (the other is beauty) — and turns the U.S.-focused retailer into an international one in one fell swoop. La Senza operates 318 stores in Canada and 327 licensed units in 34 countries under the banners La Senza, La Senza Express, La Senza Spirit and La Senza Girl, which is a tween brand that sells both intimates and apparel.
Limited revealed the acquisition after the market closed and at the same time reported a swing to a third-quarter profit from a loss a year earlier. For the quarter ended Oct. 28, Limited posted net income of $23.5 million, or 6 cents a diluted share, which compares with a prior-year loss of $683,000. Sales leaped 12 percent to $2.1 billion from $1.96 billion.
Wexner, the chairman and chief executive officer of Limited Brands, said in a statement that the La Senza deal, which is set to close in January, "is all about achieving growth for two companies that share similar values. La Senza is a very well run business, and we look forward to partnering with its management team, who will continue to operate the company in the normal course of business."
The transaction caught the market by surprise. At the bell, shares of the retailer dropped 0.7 percent to $31.78 but were off 5 percent in the hour after the market closed. The Limited said the price tag represented a premium of 47.8 percent over La Senza's closing price on the Toronto Stock Exchange.
"La Senza is a great strategic fit with our intimate apparel business, and their international infrastructure, real estate expertise and operating model will also be great assets to us as we look to enhance our capabilities to meet our strategic growth initiatives internationally," Wexner added.
The company said the acquisition will be "modestly accretive" to Limited Brands' earnings per share in 2007. Banc of America Securities and Financo Inc. served as financial advisers on the transaction.
"This gives The Limited a second intimate apparel brand with global recognition. The international infrastructure will allow The Limited to create a truly global intimate apparel company," said Gilbert Harrison, chairman of Financo.
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