A deal to buy Ann Inc. would lead to new initiatives for growing the business but no sweeping leadership changes, retail sources said Thursday.
They also said a deal to sell the $2.3 billion Ann Inc. to Golden Gate Capital is likely to go through soon, which would spell good news for the chain’s enduring chief executive officer and president, Kay Krill.
“This potential sale has been hanging over the company for some time,” observed retail analyst Walter Loeb.
Asked how Golden Gate would impact Ann Inc. Loeb said, “I think there will be a greater focus on Loft in the future, particularly in light of Macy’s coming up with a Rack type offprice store and the growing number of other promotionally priced stores.
“But first, they would get someone on the board, then try to reduce some management and apply pressure for better volume and better performance, which is what they usually do,” he added. “Ann Inc. needs a more consistent showing, but that gets me back to Kay Krill, who I think is a very good manager. She built the company up to what it is today, but the company would benefit from some new initiatives. She could handle them.”
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Last year, Krill launched a new division called Lou & Grey, a collection that fuses streetwear and loungewear with a fashion component.
“Golden Gate has been looking at Ann for a long time,” said a financial source. “They like Kay, and the board likes her. This should be a great company, but there’s been no real growth lately, but the directors love her and you’ve got to give her credit for leading the company for so long.”
In addition, Golden Gate has a track record of keeping existing management at the firms it buys into, sources noted.
Krill has been ceo of Ann Inc. since early 2005. Earlier, she was president of the corporation. She joined the company in 1994 and headed the management team of the Loft division. Her ascension to corporate ceo was largely based on her successful multi-year rollout of Loft, which is more casual and lower priced than its sister Ann Taylor division.
Recently, the company has had its share of performance ups and downs, executive changes and price promotions. For 2014, net income fell 33.7 percent to $68 million on a 1.6 percent gain in net sales to $2.3 billion.
The stock price of Ann has been rising amid the sale speculation. On Thursday, the stock closed up almost 8 percent or $2.99 to $40.35. The day before, Reuters reported that Golden Gate would likely buy Ann Inc. for around $2 billion.
“There is no question Golden Gate will buy it,” said the financial source. “I don’t think anyone else is going to come along. I would be shocked. I think the price is already high.” Golden Gate in March 2014 acquired a 9.6 percent stake in Ann as a long term investment, or 4.4 million shares for $156.2 million.
In August 2014, two activist funds Engine Capital and Red Alder pushed for a sale of the company, and in October 2014, the company signed a nondisclosure agreement for “collaborative” talks.
Last February, Golden Gate and Bain Capital were in talks to acquire the retailer, but Bain dropped out. At first, it was thought that the retailer might consider Golden Gate or some other private equity firm for a PIPE style of investment, or sale of preferred shares to a private equity firm, instead of doing an outright sale. Golden Gate still has a majority investment in Eddie Bauer. A majority stake in J. Jill was sold to Arcapita in 2011, and recently, Golden Gate sold its remaining J. Jill minority stake to Towerbrook Capital.
Golden Gate has over $12 billion under management. It intended to sell Eddie Bauer to Jos. A. Bank Clothiers for $825 million, but settled for a $42 million breakup fee instead when Jos. A. Bank sold itself to The Men’s Wearhouse.
Other banking sources this week characterized Ann Inc. as a good business, but added that strategic initiatives to improve the business for the long haul sometimes can best be done outside the short-term pressures of being a public company.
Officials at Ann Inc. and Golden Gate declined comment.