Talbots Reconsiders Sycamore’s Buyout Offer?

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Hingham, MA—After rejecting a $212 million buyout offer from Sycamore Partners, it largest shareholder, in December, Talbots Inc. is apparently rethinking the offer. The specialty retailer has signed a confidentiality agreement with Sycamore, an indication that the troubled company may be reconsidering its offer.

Sycamore, which already owns almost 10% of Talbots, had offered $3 a share, a premium over the stock’s price on Dec. 6 of $1.56 a share. But Talbots spurned the offer and began looking for “strategic alternatives.” Last week, rumors circulated that two other private equity firms, Golden Gate Capital and TPG Capital, were weighing takeover bids, too.

According to today’s  filings with the Securities & Exchange Commission however, Talbots said Sycamore agreed to a one-year “standstill agreement,” which will allow the private equity firm to do due diligence, having access to Talbots’ confidential information, like that on business operations, strategy and the company’s prospects. The agreement would also allow Sycamore to have 10-day window to put up candidates for the board ahead of Talbots’ annual meeting.

Leaves Door Open to Other Suitors

Nonetheless, agreement doesn’t preclude any other potential suitors from entering into similar agreements with Talbots.

At the time Sycamore made its offer, the private-equity firm expressed concern with the retailer’s operational performance, deep discounting, falling stock price and its announcement that Trudy Sullivan, ceo, would retire before a replacement has been found.

Noting that Talbot’s shares plunged more than 68% in 2011, 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.”

Earlier this month, Talbots said that its comparable store sales were down 6% during the fourth quarter which ended Jan. 29. Talbots now expects fourth quarter adjusted loss of 15 to 19 cents a share from continuing operations. Retail analysts’ average estimates predicted a loss of 2 cents.

Wedbush Securities analyst Betty Chen told Reuters that she believed Talbots’ confidentiality agreement with Sycamore will greatly reduce the possibility of a bidding war.

“It is possible that Talbots has already gone through its review process and the remaining party that’s still interested in continuing the dialogue is Sycamore,” Chen said.




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