Talbots Rebuffs Sycamore’s $212 Million Takeover Bid

Hingham, MA—Calling a $212 million unsolicited bid to buy it “inadequate,” Talbots today rejected private equity firm Sycamore Partner’s offer to buyout the financially troubled women’s specialty retailer.

Talbots’ board of directors said Sycamore Partner’s offer “substantially undervalues the company.” Instead, the board said it would be exploring “a full range of strategic alternatives to maximize value for Talbots’ stockholders. Pending that evaluation, the company will continue to pursue its long range plan and continue its previously announced search for a successor” to president and chief executive officer Trudy Sullivan, who plans to retire when a replacement is named.

Furthermore, the board said there was no “definitive timetable for completion of its evaluation,” not will there be any updates about the evaluation. Perella Weinberg Partners is acting as financial advisor and Dewey & LeBoeuf LLP is acting as legal counsel to Talbots. Spencer Stuart is conducting the search for the new chief executive officer.

Sycamore Partners, which already has a 9.9% stake in the company, offered to buy Talbots for $3 a share earlier this month following news that the retailer posted a $22 million loss in its most recent quarter and announced some $50 million in cost cutting as well as Sullivan’s departure.

‘Take the Money and Run’

Noting that Talbots shares plunged more than 68% this year along, Stefan Kaluzny, managing director at Sycamore, told the board “while the company has struggled during the execution of its turnaround plan, recent results have deteriorated at a dramatically faster rate and magnitude.”

News of the board’s strategic review and its rebuff of Sycamore sent Talbots’ shares up nearly 4% to $2.74 in early trading.

Sycamore’s bid has been controversial one. Some shareholders agreed with the board that Sycamore’s bid was too low.

Mitch Williams, portfolio manager at Opphenheimer Value Fund, which owns a 12% stake in Talbots, called Sycamore’s bid “very opportunistic” last week.

“The company’s numbers right now are distorted by merchandising issues,” Williams added.

But other analysts said “not so fast” in turning noses up at the Sycamore’s offer.

“Take the money and run,” Paul Lejuez, an analyst at Nomura Holdings Inc. told Bloomberg News. “That probably is the best way to sum up our view. The market doesn’t think that anybody else is going to step in.”

“With Talbots losing 5 cents on each dollar of sales in the past year, Janney Montgomery Scott LLC and Wedbush Securities said the proposal gives shareholders a ‘compelling’ premium and protects against further losses after its stock plummeted by as much as 82% this year,” Bloomberg reported, noting that analysts estimate “revenue will decline for two more fiscal years.”

“We cannot argue with an all-cash premium offer presented by Sycamore,” Adrienne Tennant, an analyst at Janney Montgomery, said in a report last week.

 

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