Hingham, MA–Talbots this week adopted a poison pill, a move to deter potential hostile takeovers, after Sycamore Partners, a private equity firm reported taking a 9.9% stake in women’s specialty retailer.
Noting that its “board of directors adopted the rights plan to promote fair and equal treatment of the company’s stockholders in light of a recent rapid accumulation of a significant percentage” of the retailer’s stock, Talbots can issue shares at a discount to all other shareholders if a single investor buys 10% or more of its stock. Such a rights plan makes it harder to mount a hostile takeover due to the resulting share dilution.
Talbots Announced Q2 Sales May Decline
According to press reports, Sycamore was started this year by Stefan Kaluzny a former Golden Gate Capital managing director and retail industry veteran. Kaluzny, who serves on the boards of Zale Corp, Eddie Bauer and is chairman at Express, had earlier worked with Talbots when Golden Gate bought the retailer’s J. Jill division in 2009.
Talbots which has seen its sales fall in the past five years is amid a turnaround effort aimed at luring in younger consumers as well as keeping its primary target, women age 50 and above.
Meanwhile, the retailer’s shares have more than halved this year, prompting some investors to call a change in management, or even a sale, if things don’t improve.
Analysts said that Kaluzny may offer up a restructuring plan and try to force the board to act on it. If the board fails to respond, Sycamore and Kaluzny could seek the support of other investors. Or investors could present an opposing slate of directors when the company holds its next annual shareholders’ meeting.
Adrienne Tennant, analyst with Janney Capital Markets, said this week Talbots may indeed a takeover target.
“Kaluzny’s prior involvement with Talbots and his experience with some of these more distressed turnarounds–such as Eddie Bauer’s–make him a more likely player in this situation,” Tennant said.
Talbots was the subject of takeover rumor in early July when the company’s stock plunged 40% in one day following the company’s announcement that second quarter sales would significantly decline and its would be shuttering 110 stores.
The 110 shops slated to be closed, accounted for about $21 million in sales and $4 million in operating loss in the first quarter 2011.
Talbots’ second quarter earnings report is scheduled to be in September.