Sycamore Raises Bid for Talbots to $215 Million

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Talbots used "real women" as models in its spring/summer lookbook

Hingham, MA—Sycamore Partners, the private equity group and Talbots’ largest shareholder, has raised its bid today to acquire the retailer.

According to Talbots’ board of directors, Talbots received an offer for $3.05 a share from Sycamore. That’s up from the $3 a share offer that the board rejected in December for undervaluing the company.

Sycamore’s offer is about a 9% premium on Talbots’ closing price on Friday and would value the specialty retailer at about $214.6 million.

Talbots said it was considering the non-binding bid and entered into an exclusivity agreement with Sycamore that ends May 15.

Talbots had 69.2 million shares outstanding as of Jan. 28, according to a filing with the Securities and Exchange Commission.

Sycamore’s director, Stefan Kaluzny has been critical of Talbots’ management and of retiring CEO Trudy Sullivan. In Sycamore’s first bid, Kaluzny wrote the board’s chairman that “given the company’s rapidly deteriorating situation during the critical holiday shopping season, we believe expeditious action is needed to protect shareholders’ investment in Talbots.” Sycamore took a 9.9% stake in Talbots last year.

Talbots, which has posted annual losses in four of the last five years, is undergoing a strategic review that includes closing 110 stores, eliminating jobs and cutting back on employees’ hours and suspending national advertising and reducing inventory levels.

For the fourth quarter ended Jan. 28, Talbots reported in April that it had a net loss of $53.3 million, compared with a loss of $2.8 million a year ago. Revenue slipped 1% to $289.4 million.

Any Other Potential Bidders?

For the year, Talbots lost $111.9 million, or $1.62 per share. Annual revenue dropped 6% to $1.14 billion from $1.21 billion. Comparable store sales dropped 5%.

Kaluzny, a former managing director at Golden Gate Capital, co-founded Sycamore last year to specialize in consumer and retail investments. So far Sycamore’s sold investment is a 41% stake in Mast Global Fashions, a third party apparel sourcing division of Limited Brands (Limited still retails a 49% stake).

But Kaluzny is very familiar with Talbots through Golden Gate’s 2009 purchase of J. Jill from Talbots at a price much lower than Talbots originally paid for it.

While some retail analysts said Talbots may again reject Sycamore’s offer, the retailer may not attract other bids.

“The bargaining power of the company is not very high. The revised offer basically reflects that as well,” Rahul Sharma, managing director at Neev Capital told Reuters.

Talbots said it wouldn’t be making any further comments on Sycamore’s or any others “unless a specific transaction is recommended by the board.”




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