City of Industry, CA—Hot Topic was truly a hot topic today on Wall Street. That’s because Sycamore Partners, the private equity firm, announced a $600 million deal to buy the teen specialty retail company and take it private.
Sycamore, which last year bought Talbots in a $369 million deal, agree to pay $14 a share in cash, representing a major premium over Hot Topic’s closing price on Wednesday of $10.75 a share.
While subject to customary closing conditions and shareholder and regulatory approvals, the acquisition has been approved by both company’s boards of directors.
“We are very excited about the future growth for the company and know that Sycamore Partners will provide great resources and expertise to us as we operate as a private company,” said Lisa Harper, chief executive.
The sale marks Sycamore Partners third major investment in the fashion industry. Besides Talbots, it also owns Mast Global Fashions (MGF), one of the largest independent apparel sourcing and manufacturing companies, formerly a part of Limited Brands Inc.
To Support ‘Company’s Continued Growth’
“We are excited to partner with the Hot Topic management team and all of its talented and passionate employees,” said Stefan Kaluzny, managing director of Sycamore Partners. “We look forward to supporting the company’s continued growth.”
Shares of Hot Topic were halted just before this morning’s announcement but jumped 30% to more than $13.89 a share when trading resumed shortly after the market opened.
Hot Topic also owns Torrid, plus-size retailers, and has been testing five lingerie specialty stores called Blackheart. As of last month, the company operated 618 Hot Topic stores and 190 Torrid stores.
For its fourth quarter ended Feb. 2, Hot Topic Inc. reported an 11% increase in revenue to $233 million with comparable store sales up 2% at Hot Topic stores and up 5.4% at Torrid.
Guggenheim Securities is acting as financial advisor to Hot Topic, while Bank of Bank of America Merrill Lynch is acting at Sycamore’s advisor.