J. Crew Group Inc. is now trading barbs with Institutional Shareholder Services Inc., an influential investor advisory firm, which recommended shareholders vote against the retailer’s $3 billion deal to be taken private by TPG Capital and Leonard Green & Partners.
ISS said there was a “less-than-compelling strategic rationale to sell the company at a lower-than-prevalent market premium,” as well as “serious issues in the sales process that gave TPG a significant advantage.” Shareholders will vote on the deal at a special meeting March 1.
Millard “Mickey” Drexler, J. Crew’s chairman and chief executive officer, has come under fire for talking to the private equity firms about a potential buyout almost seven weeks before presenting it to his board.
On Tuesday, J. Crew said the deal was fair.
“Unfortunately, ISS’s report is based on flawed analyses, and we believe that ISS has reached the wrong recommendation with respect to the contemplated transaction with TPG and Leonard Green,” said Josh Weston, chairman of the special committee of J. Crew’s board, which negotiated the agreement.
“The special committee ran a thorough process including analyzing the risks and rewards of all alternatives,” Weston said. “This process resulted in a premium offer that provides immediate and certain value to J. Crew shareholders. We urge all shareholders to vote on the facts and in favor of this transaction.”
J. Crew today will file an investor presentation laying out its point of view.
The deal has also kept the courts busy. Shareholders sued the company in Delaware Chancery Court and reached a last-minute $10 million settlement that also allowed the firm to appeal to other suitors for an additional month. The shareholders have since tried to back out of the settlement, claiming the retailer violated its terms by revealing in January that it had received no competing offers.
The investors have threatened to go to trial for monetary damages, and J. Crew has said it might countersue.
The court is waiting until after shareholders vote on the deal to address the case.