Neither the investment community nor the management of Ann Inc. was moved by the second push by activist investors Engine Capital LP and Red Alder to effect a sale of the retail chain.
In a presentation to other Ann shareholders, the hedge funds asserted that a sale to a retailer such as Chico’s FAS Inc., Ascena Retail Group Inc., J. Crew Group Inc. or Fast Retailing Co. Ltd. could generate $60 to $65 a share in proceeds, while a sale to a private equity firm such as Golden Gate Partners, Sycamore Partners or Apax Partners could bring in between $50 and $55 a share.
But unlike developments last month when the firms revealed their ideas about ways of unlocking shareholder value and the stock shot up 6.5 percent to $39.94, Ann Inc.’s shares Monday slipped 31 cents, or 0.8 percent, to $40.51 following disclosure of elements of a presentation sent to other shareholders.
Ann reacted to the analysis with questions of its own and noted that its “full board has had the opportunity to review the presentation” from the two investors, who together own about 1 percent of the retailer’s shares.
“While the board appreciates the input of Engine Capital and Red Alder, none of the analyses contained in their presentation is new to the board,” the company said. “The conclusions that one draws from these analyses depend heavily on various assumptions made. The board continues in a deliberate manner and on an informed basis to consider and determine the courses of action that are in the best interests of all of its shareholders.”
Further, Ann noted that it “regularly reviews all options reasonably available to the company and, as is typical, utilizes the services of a financial adviser in connection with those reviews.” Reuters earlier reported that Ann had retained J.P. Morgan as its financial adviser.
Engine and Red Alder pressured Ann to explore strategic alternatives in late August, when it expressed disappointment at the lack of progress made in pursuing such a course of action following private talks with company officials.
Golden Gate Capital in March paid $156.2 million for a 9.5 percent stake in the women’s wear retailer, but has not publicly pressed for changes in ownership or capitalization.
In their previous push for action at Ann, the two investors suggested, as an alternative to a sale, that the retailer borrow money and repurchase a third of its shares outstanding through a tender offer to existing shareholders.
When the firms took their qualms with Ann’s management public last month, Stifel Nicolaus analyst Richard Jaffe told clients he considered a sale of the company “unlikely,” since it is viewed as “a nearly mature business with limited square footage growth remaining in the company’s existing concepts.” Additionally, he said that Stifel wasn’t aware of a new concept or a push for international expansion and that recent cost-cutting moves by management would impair a private equity company’s ability to cut costs.
Ann last month reported an 8.1 percent decline in second-quarter net income, to $32.7 million, or 70 cents a diluted share, on a 1.6 percent increase in sales to $648.7 million.