Hingham, MA—Less than a week after negotiations seemed to falter, Sycamore Partners, a private equity firm, said Thursday it has reached an agreement to buy Tablots in a transaction valued at about $369 million which includes $176 million in debt.
Under the agreement, Sycamore will acquire all the outstanding common stock of Talbots for $2.75 a share in cash. The deal, which is expected to close in the third quarter, is for less than the $3.05 a share Sycamore had offered in May when negotiations stalled. It is also less than the $3 a share offer Sycamore proposed in December, which Talbots’ board of directors promptly rejected saying it undervalued the company.
Shares of Talbots closed Wednesday at $1.29.
Talbots began exploring its “strategic options” including a sale last year after continuing to post losses and disappointing sales and implementing cost cutting measures including eliminating jobs, shuttering stores and reducing advertising and marketing.
“Sycamore Partners is a strong investor with substantial resources and expertise, and we look forward to operating as a private company under their ownership,” said Trudy Sullivan, ceo, who will soon step down to retire. Talbots is amid a search for her successor, one that now will likely be taken up by Sycamore.
Turnaround Easier as a Private Company?
In a letter to employees, Sullivan indicated that the measures necessary to turn around the beleaguered specialty store would be more easily executed when the company is private without constant scrutiny of retail analysts.
“As a private company, we will have greater freedom to focus on longer-term investments and opportunities, while providing you with rewarding careers, excellent benefits and challenging roles,” Sullivan stated.
That sentiment was echoed by Jennifer David, retail analyst at Lazard Capital Markets, who noted the $2.75 a share selling price, is Talbots is the best option, “considering that the stock recently closed at $1.29 and considering that they don’t have a CEO lined up and that they’re in the middle of a turnaround. It’s better to go through this turnaround not in the public eye.”
Sycamore, which is headed by Stefan Kaluzny, formerly of Golden Gate Capital, has been Talbots’ second largest shareholder with nearly a 10% stake in Talbots.
“We believe in the Talbots brand and its more than 8,000 associates,” said Kaluzny. “We look forward to a long and successful partnership with Talbots serving its many loyal customers.”