Hot Topic Inc., the City of Industry, Calif.-based teen clothing retailer, has agreed to be acquired by New York-based private equity firm Sycamore Partners LLC for $14 per share in cash, it was announced Thursday, March 7.

The $14 per share offer gives the company a valuation of about $600 million, the announcement said. Hot Topic had no debt, but had cash, cash equivalents and short-term investments of nearly $59 million for the quarter ended Oct. 27, according to its quarterly statement filed with the Securities and Exchange Commission on Nov. 20.

The transaction translates to about 8.3 times Ebitda based on Bloomberg data, which estimated Ebitda for fiscal 2013 of nearly $65 million.

The offer is about a 30% premium to Hot Topic's Wednesday closing price of $10.75 per share.

A source close to the situation said Sycamore liked how CEO Lisa Harper and her management team had turned around Hot Topic, making it an attractive target.

The deal, a one-step merger with Hot Topic as the surviving company, is conditioned on shareholder and regulatory approval. Harper and Becker Drapkin Management LP, who collectively hold 8.9% of the company's stock, have signed agreements "indicating they would support the proposed transaction."

And Sycamore hasn't stopped looking for targets, according to a source. With about $1 billion raised for its debut fund last year, the private equity firm, founded by Stefan Kaluzny and Peter Morrow, which targets troubled retailers, has plenty of dry powder available.

Sycamore has already snatched Mast Global Fashions and Talbots Inc. off the rack in the past two years, and could be eyeing True Religion Apparel Inc., as well as Billabong International Ltd. "If it's up for sale, Sycamore is looking at it," a source said.

But that isn't to say that there won't be plenty of other shoppers in the distressed retailer sector.

For instance, Hot Topic is also parent to Torrid, a plus-size retailer for young women. Plus-size retailers have attracted plenty of attention, as Lane Bryant, and its parent Charming Shoppes Inc., sold to Ascena Retail Group Inc. for $890 million on May 2.

And plus-size retailer Avenue Stores LLC is now being pitched to potential suitors only months after being bought out of bankruptcy, according to two sources familiar with the situation. Avenue Stores was acquired by Versa Capital Management LLC in September as part of the liquidation of its parent, United Retail Group Inc.

A source said the chain had been pitched to prospective buyers for about a month now.

In addition to advising Hot Topic, investment bank Guggenheim Partners LLC is also potentially fielding bids for True Religion and continues to advise Wet Seal Inc., which was the target of an activist campaign and is being prepped for a sale, sources said.

Wet Seal's board and its activist investor, Clinton Group Inc., want more time to turn around the company. Among likely acquirers of Wet Seal include private equity firm KarpReilly LLC, which brought on former Wet Seal CEO Ed Thomas as a partner.

Hot Topic, Wet Seal, as well as Bebe Stores Inc. were among middle-market retail targets that The Daily Deal reported as being specifically targeted by buyout shops in early 2011. That's when the buying binge for retailers began in earnest following Leonard Green & Partners LP and TPG Capital's $3 billion deal for J. Crew Group Inc. in late 2010.

A Guggenheim team of Peter Comisar, Eric Rutkoske and Justin Lancer provided financial advice to Hot Topic. The retailer received legal advise from a Cooley LLP team consisting of Barbara Borden and Jason Kent. Sycamore turned to Bank of America Merrill Lynch's David Russell and Blake Hallinan and took legal advice from Gary M. Holihan PC and Winston & Strawn LLP.