By and  on April 7, 2010

After six deadline extensions, The Talbots Inc. finally completed its warrant exchange offer with BPW Acquisition Corp., allowing the retailer to acquire the special purpose acquisition company on Wednesday.

“The completion of this merger and related transactions marks an important milestone for Talbots,” said Trudy F. Sullivan, president and chief executive officer of the Hingham, Mass.-based women’s apparel store chain. “With an improved financial foundation and capital structure in place, we believe we are well-positioned for future growth and value creation for all our stakeholders.”

Talbots said that in addition to closing the BPW deal, it repurchased about 29.9 million of shares held by former majority stockholder Aeon Inc., which constituted a 54 percent stake in the specialty retail firm.

The retailer also repaid all outstanding debt to Aeon, or roughly $486.5 million plus accrued interest and other costs, and completed a senior secured revolving credit facility of up to $200 million with GE Capital Markets.

“This deal allows Talbots to focus on its business,” said FBR Capital Markets analyst Adrienne Tennant. “It’s a very unique transaction that allows Talbots to raise capital and not incur much dilution.”

Already in the midst of a turnaround, Talbots is “one of the best margin recovery stories in retail,” said UBS specialty retail analyst Roxanne Meyer, who added she sees “fundamentals improving from better merchandise, marketing, sourcing and a return of the Boomer shopper.”

According to Meyer, news of the deal will “provide the opportunity for investors to look at one of the most attractive turnaround stories in retail.”

Shares were up 26 cents, or 2 percent, to $13.47 on Wednesday.

Based on the merger exchange ratio of 0.9853 Talbots shares for each BPW share, the newly issued warrants to acquire Talbots shares will have an exercise price of $14.85 a Talbots share. The final results of the elections and proration calculations are expected to be announced on or about Friday.

Shares of BPW will cease trading on the American Stock Exchange prior to the start of trading on Thursday.

The warrant exchange offer, completed Tuesday, cleared the way for Wednesday’s merger. As of the final Tuesday deadline of 6 p.m., 90.3 percent of warrants issued when BPW went public had been tendered, passing the 90 percent threshold required.

After the expiration of the sixth deadline on Monday, the percentage had been stuck at 87.5 percent, where it had dwelled since the first extension on March 29.

The deal, unveiled in December, had recently faced opposition from a group of hedge funds holding about 9 percent of the outstanding warrants. A request for a temporary restraining order from those investors that could have blocked the deal was denied by a Delaware state court last month, but the holders had vowed not to tender their warrants.

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