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Sycamore finally bags Talbots

by Richard Collings | Published June 1, 2012 at 8:27 AM

After a great deal of public back-and-forth, women's apparel retailer Talbots Inc. agreed to be acquired by New York private equity firm Sycamore Partners LLC for $2.75 per share in cash.

The deal, announced on Thursday, May 31, values Hingham, Mass.-based Talbots at roughly $193 million. The companies said that with the assumption of debt, the transaction is valued at $369 million and is expected to close in the third quarter of this year.

The final price is less than the initial unsolicited $3 per share bid Sycamore made on Dec. 7, which Talbots initially rejected.

Sycamore sweetened its proposal to $3.05 per share on May 7, and the parties entered into exclusive negotiations that were set to expire May 15. After two extensions, Sycamore withdrew its bid on May 25 without providing a reason.

A source with knowledge of the situation said Sycamore lowered its bid because it was the only buyer for the company. The source added that the haggling between Talbots and Sycamore was not unusual, but in this case was made public by the fact that Sycamore had already made an investment in the retailer.

Sycamore, led by Golden Gate Capital veteran Stefan Kaluzny, reported accumulating a 9.9% stake in the company on Aug. 1. One day later, Talbots adopted a poison pill.

The agreed-to deal is 113% premium to Talbots' $1.29 closing price on Wednesday and a 76% premium to its closing price on Dec. 6, the day prior to Sycamore's initial proposal, the companies said.

Sycamore declined to comment on how much equity it planned to invest in the business or what it would do with the retailer's debt, which stood at about $116 million as of Jan. 28, according to a filings with the Securities and Exchange Commission

On Feb. 16, Talbots added a $75 million secured term loan raised by Wells Fargo Bank NA.

Sycamore also declined to say if it planned to sell or retain Talbots' credit card receivables business.

Talbots was not bargaining from a position of strength as it negotiated a deal with Sycamore. On May 25, the company reported that its net sales dropped to $275.9 million for the first quarter ended April 28, from $301.3 million for a similar period the year prior, revealing continuing difficulties with its business.

Talbots also continues to hunt for a new chief executive to replace Trudy Sullivan, who announced plans to retire in December.

Talbots received financial advice from a Perella Weinberg Partners LP team consisting of Andrew Bednar and Yezan Haddadin, and legal advice from Morton A. Pierce, Chang-Do Gong and Robert Chung at White & Case LLP.

Sycamore received financial advice from a Bank of America Merrill Lynch team consisting of Stefan Selig, David Russell and Blake Hallinan and legal advice from Gary M. Holihan PC and a Winston & Strawn LLP team consisting of James P. Faley, Cab Morris and Robert F. Wall.

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Sycamore finally bags Talbots

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Richard Collings

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