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Ascena Buys Charming Shoppes for $890 Million

Companies call deal a compelling, strategic fit.

Ascena Retail Group has acquired Charming Shoppes, Inc., in a cash transaction valued at about $890 million, the companies said today.

Ascena has agreed to make a cash tender offer for all outstanding shares of Charming Shoppes common stock at a price of $7.35 per share. The tender offer is expected to commence within 10 business days. Subject to customary conditions and approvals, it is expected to close during the second calendar quarter of 2012.

“Charming Shoppes is a superb strategic fit for Ascena,” said Ascena president and chief executive David Jaffe. “A key component of our growth strategy over the past several years has been to make highly selective and powerful acquisitions.

“We’ve built a family of retail brands, each serving a unique customer niche, with a culture that embraces the sharing of resources, new ideas and talented team members. Over the past few years, we have welcomed into our family new brands and new team members while delivering increasing value to shareholders. We believe that Charming Shoppes will be no exception.”

Charming Shoppes operates 1,857 stores under the Lane Bryant, Cacique, Fashion Bug and Catherine Plus Sizes brands.

Michael Goldstein, chairman of the board of Charming Shoppes, said: “The Board of Directors of Charming Shoppes is pleased with this transaction, which represents the outcome of the strategic review and extensive sale process we commenced on December 1, 2011.

“In addition to partnering with a buyer that can support the future growth and development of our businesses, the $7.35 per share consideration represents a premium of 25 percent to the closing market price of Charming Shoppes common stock on May 1, 2012 and an 89 percent premium to the unaffected share price of Charming Shoppe’s common stock on November 30, 2011, the day prior to our announcement of our strategic review process. We are confident that this transaction is in the best interests of our shareholders.”

BofA Merrill Lynch is acting as financial advisor and Proskauer Rose LLP as legal advisors for Ascena Retail Group, Inc. Barclays is acting as financial advisor and Drinker Biddle & Reath LLP and Schulte Roth & Zabel LLP as legal advisors to Charming Shoppes, Inc.

As reported in March, Charming Shoppes Inc. reported a loss in the fourth quarter of the year, with the business weighed down by higher production costs and price pressures at retail.

Net losses narrowed to $13.2 million, or 11 cents a share, from $30.4 million, or 26 cents, a year earlier. Adjusted losses, which factor out restructuring charges, totaled 6 cents a share and were 4 cents worse than the 2 cents analysts expected.

Sales for the three months ended Jan. 28 slipped 2.9 percent to $559.1 million from $575.8 million. In March, the company said it planned to shift its merchandising strategy, focusing on seasonal, faster-turning novelty looks rather than carrying fashion basics year-round.

For the full year, Charming Shoppes’ losses narrowed to $2 million from $54 million in the prior year. Sales fell 3.4 percent to $2 billion. This year, Charming Shoppes was set to close between 90 and 105 stores, while opening 20 new stores and relocating 25.