Sycamore Partners to Buy Talbots for $369M

In an abrupt change in direction, the specialty chain will be acquired by the private equity firm for less than was previously offered.


The Talbots Inc. ended up with Sycamore Partners after all.

This story first appeared in the June 1, 2012 issue of WWD.  Subscribe Today.

Sycamore is buying the struggling women’s specialty chain for $193.3 million in cash. Including net debt, the transaction has a total value of $369 million. The deal is expected to close in the third quarter.

The acquisition price will give shareholders $2.75 a share, less than the $3.05 a share that was previously put on the table by the private equity firm. The price per share that shareholders will receive is still far more than the closing price of Talbots’ stock on Wednesday, which was $1.29 a share. Shares of Talbots spiked 89.2 percent to $2.44 in trading Thursday on the Big Board.

Stefan Kaluzny, managing director of Sycamore Partners, said his firm is looking forward to a “long and successful partnership with Talbots serving its many loyal customers.”

Trudy Sullivan, Talbots’ president and chief executive officer, said, “Sycamore Partners is a strong investor with substantial resources and expertise, and we look forward to operating as a private company under their ownership.”

Sullivan plans to step down at Talbots on June 30, or sooner if her successor is found.

Thursday’s announcement was an abrupt change from a week ago, when the two said the exclusivity agreement they had to close on a transaction had expired without further extension. The news led investors to believe that Sycamore had walked away, since Talbots said it was weighing alternative options. There even was speculation that Talbots might be facing a bankruptcy before yearend if it couldn’t find a buyer.

Talbots has been struggling with persistent losses, a multiyear decline of its stock price and liquidity concerns. Besides the retirement of Sullivan without identifying a successor, the chain also dismissed its chief creative officer, Michael Smaldone, in September. His position has not been filled. The retailer operates in a sector — missy — that has been squeezed by demographics, changing fashion tastes and the overall economy.

Still, the Talbots buyout is the latest deal in a wave of mergers and acquisitions activity in the fashion and luxury sector. Morton A. Pierce, partner in the mergers and acquisitions practice group at White & Case, which represented Talbots, said, “Activity has picked up.…Both the strategic and the financial buyers are out there [looking to do deals].”

The bubbling M&A activity is in contrast to what could be the beginning of a slowdown in initial public offerings in the sector, given Wednesday’s announcement from Graff Diamonds Corp. that it was cancelling its planned IPO in Hong Kong. Analysts in Hong Kong said that Graff’s decision was a result of the lukewarm reaction to the IPO given the price of its shares.

In just the last three weeks of May, there were four brands on the market in the U.S.: Nike Inc. on Thursday said it was divesting Cole Haan and Umbro. Earlier this month, St. John was put on the block by Vestar Capital Partners, while Kellwood Co., owned by Sun Capital Partners, said it was in discussions with Johan Lindeberg to transfer partial ownership of BLK DNM. That deal was also completed Thursday.

Globally, there were 62 deals disclosed in the apparel and footwear retail sector between Jan. 1 and May 2, carrying a total value of $3.66 billion, according to Dealogic. That’s about the same number of deals seen a year earlier, but just over twice the value.

In the month of May alone, no less than 18 deals were revealed.

Eight of those transactions were overseas: U.K.-based retailer Booker said it was acquiring Makro; luxury Swedish shirt brand Eton sold a 65 percent stake to private equity firm Litorina IV; Go to Enterprise Sarl took a majority stake in Vionnet SpA; Lion Capital agreed to invest in the French eyewear retailer Alain Afflelou; Turkish footwear giant Ziylan Group agreed to purchase Italian shoe firm Lumberjack; YGM Trading inked a deal to buy Aquascutum Ltd.; Delta Galil Industries Ltd. agreed to acquire Schiesser AG, and Advent International sold French discounter Stokomani to private equity firm Sagard and Stokomani’s management team.

In the U.S., 10 transactions were unveiled: Macy’s Inc., along with others, invested $15 million to acquire a minority stake in Chinese-based e-commerce company VIP Store Co. Ltd.; online jewelry retailer Bidz.com will be acquired by Glendon Group Inc.; members-only online shopping program ShopRunner acquired Boston-based PickupZone; beach-culture inspired brand Tavik was purchased by Incipio Technologies Inc.; Gildan Activewear said it would buy Anvil Holdings Inc.; the rights to the Fred Segal brand were sold to Sandow Media; Ascena Retail Group Inc. agreed to acquire Charming Shoppes Inc.; Marchon Eyewear Inc. acquired sports performance eyewear brand Dragon Alliance, and Collective Brands Inc. reached a $2 billion deal to split up and sell its operations to Wolverine World Wide Inc. and two private equity firms, Blum Capital and Golden Gate Capital.

The 10th U.S. deal was the acquisition of Prince Sports by Authentic Brands Group as part of Prince’s prepackaged bankruptcy filing in a Delaware bankruptcy court.

In the special situations category, one of the more active financial buyers has been Sun European Partners, the European adviser of U.S. private equity firm Sun Capital Partners, which earlier this year acquired Bonmarché.

Given the work needed to be done at Talbots, Sycamore seems poised to join the ranks of Sun and Versa Capital in the top ranks of the specialized turnaround sphere. Versa in April acquired bankrupt United Retail, the operator of the Avenue retail chain.

Sycamore has reportedly closed on $600 million in commitments for its first fund-raising effort, with a target of $750 million. Its first deal in November was a 51 percent stake in Limited Brands Inc.’s sourcing division, Mast Global. The private equity firm is expected to remain on the prowl for more deals in the retail and fashion space.