Sycamore Partners, the New York investment firm that has pursued a takeover of Talbots Inc. since December, has walked away from its proposed deal, sending shares of the retailer’s stock tumbling and leaving an uncertain future for the troubled Hingham merchant.
Sycamore, which owns a nearly 10 percent stake in the classic clothier, informed Talbots on Friday that it is “not prepared to execute a transaction” after the two companies held exclusive talks for weeks, and twice extended the deadline for negotiations on the private equity firm’s $215 million offer, according to documents filed with the Securities and Exchange Commission.
Shares of Talbots stock plunged 41 percent on Friday to close at $1.51 on the New York Stock Exchange.
Talbots said it is willing to make a deal with Sycamore at $3.05 per share as long as the transaction provides for an appropriate level of closing certainty and is supported by debt and equity financing.
“We worked diligently and in good faith on a potential deal,” said Talbots spokeswoman Julie Lorgian. “We will continue to actively explore strategic alternatives and are committed to pursuing the best interests of our shareholders.”
A Sycamore spokesman declined to comment.
Sycamore, a new private equity firm started by veteran investor Stefan L. Kaluzny, first made an unsolicited bid for the apparel maker in December for $3 per share, sending the stock soaring. The Talbots board of directors rejected that offer, saying it undervalued the company. The board later disclosed plans to explore strategic alternatives, and recently struck a tentative agreement with Sycamore after the firm upped its bid to $3.05 a share.
Now that talks have apparently failed, analysts say it is unclear whether another suitor will appear for the struggling brand, which operates 516 stores across the United States and Canada.
The Hingham merchant, which had historically catered to older career women, has alienated existing customers by trying to appeal to a younger demographic and battled sagging sales for years, according to industry analysts.
“My assumption is that Talbots wanted more and Sycamore is refusing to give them more,” said Mike Tesler, president of Retail Concepts, a consultancy in Norwell.
The collapsed deal overshadowed the company’s better-than-expected first-quarter earnings. Talbots on Friday reported net income was $1.1 million, or 2 cents a share, up from a penny a share during the same period last year. But sales dropped to $276 million from $301 million, in part because of store closings.
The scuttled deal comes as Trudy F. Sullivan, Talbots chief executive, prepares to leave the classic clothier in June.
“The only way out for them is to get an influx of cash and and visionary,” Tesler said. “I don’t know if Sycamore is the magic bullet.”Jenn Abelson can be reached at firstname.lastname@example.org. Follow her on Twitter @jennabelson.