Print | Share | Reprint

Sycamore makes unsolicited bid for Talbots

by Richard Collings and Lou Whiteman | Published December 7, 2011 at 11:23 AM

Sycamore Partners LLC late Tuesday, Dec. 6 made an unsolicited offer to buy Talbots Inc. for about $212 million, more than three months after first disclosing a stake in the troubled women's apparel retailer.

The offer values Talbots at $3 per share, a premium of 92% over the company's battered stock price, which closed Tuesday at $1.56. Sycamore in a letter to management said it might consider sweetening the offer should Talbots agree to discussions that would include access to financial data.

Sycamore in August reported a 9.9% stake in Talbots, causing the Hingham, Mass.-based retailer to quickly adopt a poison pill designed to ward off unwanted advances. The company in a statement late Tuesday confirmed receipt of the Sycamore offer, and said its board would evaluate the proposal in consultation with advisers Perella Weinberg Partners and Dewey & LeBoeuf LLP.

The private equity firm said in its filing that it had met with Talbots management several weeks ago, but has since been rebuffed in attempts to hold further talks. Sycamore cited concerns including the loss of Talbots' chief creative officer, disappointing recent quarterly results and a deteriorating balance sheet as motivation to go directly to shareholders.

Talbots is also trying to find a successor to CEO Trudy F. Sullivan, who on Monday said she would retire once her successor named.

"Given the company's rapidly deteriorating situation during the critical holiday shopping season, we believe expeditious action is needed to protect shareholders' investment in Talbots," the firm wrote. The company as of Oct. 29 had $19.25 million in cash and $164.35 million in debt.

A source familiar with the situation said that if Talbots' board decides to launch an auction and open the floor to rival bidders, few suitors would appear.

In past auctions of troubled retailers, just a few financial sponsors showed interest. Only Sun Capital, Golden Gate and Irving Place Capital have the expertise to turn around a troubled firm such as Talbots, the source said.

Sycamore settled on a $3 per share offer as the average price it paid in acquiring its 9.9% stake, the source said, calculating that the bid offered enough of a premium to prevent the board from rejecting it outright. Though Talbots stock hit a 52-week high of $10.40 about a year ago, it fell about 80% over the year and is far from the $25 it hit in 2007.

Adrienne Tennant, an analyst with Janney Capital Markets, in a Tuesday report expressed doubt that Talbots has the balance sheet and cash flow to attempt a long-term turnaround. She estimates it would take about 12 months to put in place a new management team and make a meaningful impact on Talbots' business--time the retailer may not have.

In the wake of the Sycamore offer, Betty Chen and Alex Pham, analysts at Wedbush Securities, upgraded their recommendation on Talbots shares from underperform to neutral. They expect the sale to Sycamore will close, given the size of the premium and given
Sycamore's willingness to increase the bid should management provide additional information.

Sycamore last month bought a 51% stake in third-party apparel sourcing firm Mast Global Fashions from Limited Brands Inc. Industry sources speculated at the time that the investment was likely driven by Sycamore's desire to have a sourcing platform for other potential investments, such as Talbots.

The firm was founded last January by Stefan Kaluzny, a former Golden Gate Capital managing director and retail and consumer specialist known for his well-timed purchases and turnaround skills. Golden Gate's previous investments include Express Inc., which has been revived, and Eddie Bauer LLC and J. Jill Group Inc., both works in progress.

J. Jill, a former Talbots brand, was sold to Golden Gate in 2009 for roughly $75 million three years after Talbots acquired then-publicly traded J. Jill for $517 million.

Share:

Tags: apparel | clothing | retail | Sycamore Partners LLC | Talbots Inc.

Consumer & Retail

Sycamore makes unsolicited bid for Talbots

Free preview

Meet the journalists

Richard Collings

Senior Writer: Consumer Products & Retail

Movers & Shakers

Video

Coming back for more

Sectors