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Sycamore values Mast Global at $300M

by Richard Collings  |  Published November 7, 2011 at 10:22 AM
Sycamore-values-Mast-Global-at-$300M227.jpgSycamore  Partners LLC's acquisition of a 51% stake in Mast Global Fashions from Limited Brands Inc., announced Thursday, Nov. 3, valued the third-party apparel sourcing division at around $300 million, said a source close to the situation.

The $300 million valuation was about 6 times Ebitda, the source added.

Limited Brands received a cash payment of between $100 million and $200 million in the stake sale, the source said. Limited Brands will retain a 49% stake in the now standalone business.

Bank of America Merrill Lynch provided an asset-backed credit facility to finance the deal, according to the source, who declined to comment on the size of the loan.

A second source familiar with the situation said the investment was likely driven by Sycamore's desire to have a sourcing platform for other potential investments, such as in listed apparel retailer Talbots Inc.

Sycamore reported that it had accumulated a 9.9% stake in Talbots on Aug. 1. One day later, Talbots adopted a poison pill to either ward off or give the retailer additional leverage in a potential buyout.

Stefan Kaluzny, a managing director at Sycamore, said in a statement that Mast Global Fashions is one of the three largest apparel sourcing companies in the world.

James Schwartz, a 28-year veteran of Mast Global Fashions, will serve as its chief executive.

Limited Brands had already sold all of its remaining apparel businesses, including Limited Stores LLC, Express and New York & Co., so Mast Global was no longer core to the company's strategy, said Stefan Selig, executive vice chairman of Bank of America Merrill Lynch, who handled the sale of Mast Global.

In July 2007 Golden Gate Capital scooped up a 75% holding in Express from Limited Brands, which retained a 25% stake, for $602 million before taking the company public in 2010. Sun Capital Partners Inc. bought a 75% stake in Limited Stores for $125 million in July 2007. Sun Capital then acquired the remaining 25% from Limited Brands in June 2010 for $32 million.

Bear Stearns Merchant Banking, now known as Irving Place Capital Management LP, along with Richard Crystal acquired Lerner New York/New York & Co. in November 2002 for $153.5 million.

Selig said the sale of Mast Global was not a broad auction, but rather a process in which only a handful of participants who were deemed to be potentially good partners were contacted. Limited Brands, he explained, sought not only a high valuation, but also a firm that was most likely to grow the business, while not highly levering the business and limiting its future flexibility.

Kaluzny, a founder of Sycamore, was previously with Golden Gate and was key in that private equity firm's acquisition of Express from Limited Brands. As a result, Limited Brands trusted Kaluzny to once again work his magic on Mast Global, leveraging his experience and vast contacts in the women's retail apparel world to boost growth at the sourcing business.

Limited Brands not only wanted to "take a lot of cash off the table," but also wanted "a second bite of the apple" by retaining a meaningful stake, realizing additional upside down the road when the company may be taken public, Selig said.

Davis Polk & Wardwell LLP provided legal advice to Limited Brands while Selig was the seller's sole investment banker.

Sycamore tapped Gary Holihan of the Law Offices of Gary M. Holihan and Winston & Strawn LLP for legal advice. Sycamore did not use financial advisers.
Tags: asset-backed credit facility | Bank of America Merrill Lynch | Davis Polk & Wardwell LLP | Express | James Schwartz | Limited Brands Inc. | Limited Stores LLC | Mast Global Fashions | New York & Co. | Stefan Kaluzny | Sycamore Partners LLC | Talbots Inc. | women's retail apparel

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Richard Collings

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