The New York investment firm that days ago scuttled its offer for Talbots Inc. has agreed to buy the beleaguered Hingham merchant in a scaled-back deal valued at roughly $193 million.
Sycamore Partners, which last year acquired a nearly 10 percent stake in the retailer, offered stockholders $2.75 in cash per share and agreed to take on about $176 million in debt, according to the proposed deal.
The purchase price represents a 76 percent premium to the closing price on Dec. 6, the day before Sycamore first disclosed its unsolicited bid for the classic clothier.
Talbots’ embrace of the $2.75 offer is a reversal from its response in December.
After Sycamore offered $3 per share, Talbots rejected the bid as being inadequate and “substantially” undervaluing the retailer.
It has been a rocky week for Talbots, with its shares plunging more than 40 percent since Sycamore walked away from its even sweeter bid of $3.05 per share and rumors of a possible bankruptcy surfaced.
The troubled brand, which caters to older career women, has been unable to stage a turnaround in recent years and apparently could not attract other suitors. Shares of Talbots stock shot up 89 percent on Thursday to close at $2.44 on the New York Stock Exchange.
Trudy Sullivan, Talbots’ chief executive, who plans to step down this month, said in a statement: “We are pleased with the value this transaction delivers to our stockholders and believe that this is a positive development for all of our stakeholders. Sycamore Partners is a strong investor with substantial resources and expertise, and we look forward to operating as a private company under their ownership.”
Stefan Kaluzny, a managing director of Sycamore Partners, which was founded last year, said in a statement: “We believe in the Talbots brand and its more than 8,000 Associates. We look forward to a long and successful partnership with Talbots serving its many loyal customers.”
Kaluzny formerly served as chairman of the board of directors for Express Inc. His firm, Sycamore Partners, acquired a controlling interest in Mast Global Fashions last year, which is one of the largest independent apparel sourcing companies.
Sycamore declined to comment further on the Talbots deal. Julie Lorigan, a Talbots spokeswoman, would not answer questions on whether the deal would result in employee layoffs.
Jennifer Davis, a retail analyst with Lazard Capital Markets, said the $2.75-per-share offer for 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.”
In a letter to employees, Sullivan highlighted the benefits of remaking the company without worrying about Wall Street: “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.”
Under Sullivan, Talbots tried to court younger consumers in an attempt to catch up with better-performing competitors like Chico’s and Coldwater Creek. But the strategy alienated core consumers and failed to attract new shoppers, resulting in plunging revenues and the closing of hundreds of stores, including the men’s and children’s divisions. Today, Talbots operates about 516 stores in 46 states and in Canada.
The transaction is expected to close in the third quarter of this year, as long as the companies meet several requirements, including receiving a letter from the Pension Benefit Guaranty Corporation stating it has concluded its investigation of the deal.
The federal agency, which is responsible for protecting pension benefits, is examining the resulting capital structure for Talbots and the proposed future business to determine whether pensions are at risk, said Marc Hopkins, an agency spokesman.
“We routinely monitor transactions involving distressed companies with underfunded pension plans,” Hopkins said. “Our concern is how a transaction may affect the company’s ability to meet its future pension obligations.”