In a report on Tuesday, The Wall Street Journal says the negotiations between Fast Retailing and J. Crew have ended.
After reports surfaced that Fast Retailing was looking to add the American retailer to its widening stable of brands, rumors circulated that the $5 billion asking price for J. Crew was too high—some 17 times J. Crew’s enterprise value. Most retail mergers/acquisitions tend to be in the 7 to 8 times valuation.
J. Crew to IPO?
Some close to the acquisition talks blamed the publicity surrounding the proposal as dampening the talks.
Although the talks could resume at a future point, it’s likely that J. Crew’s owners, private-equity firms TPG and Leonard Green & Partner will continue with their IPO plans, or even entertain other suitors, Wall Street Journal said.
“Private-equity firms often pursue a so-called dual-track process to sell an investment, preparing a company they own for an IPO while simultaneously soliciting bids for an outright purchase.”
Selling J. Crew in a merger deal, however, can be a faster way to reap profits. An IPO must be conducted with certain market restrictions and complications and take more time to cash out.
On the other hand, Fast Retailing, Asia’s largest clothing retailer, has ambitions to be the largest apparel retailer in the United States, too, and is heavily investing in building a U.S. network of Uniqlo stores.