Multichannel Merchant quotes Chris Kampe, Tully & Holland's Retail Group Managing Director, regarding Sycamore Partners' second bid to acquire struggling Talbots.
May 9, 2012 - In a move indicating this acquisition as a priority for Sycamore Partners, the private equity firm has upped its December 2011 offer from $3.00 per share to $3.05 per share to acquire outstanding stock of the company. Talbots rejected the December offer and opted to explore strategic alternatives. In connection with the current, non-binding proposal which will terminate on May 15th, Talbots has entered into an exclusivity agreement with Sycamore Partners.
Chris Kampe, Managing Director with Tully & Holland, Inc., said Talbots has endured serious financial difficulties posting losses in four of the past five years. "To fund these losses, Talbots burned through most of its cash and leveraged its balance sheet by taking on additional debt" Kampe said. "Efforts to stem the losses, including reducing payroll, closing underperforming stores, and reduced advertising costs, have not been sufficiently successful.
Kampe said Sycamore's current offer isn't high by takeover standards. "Talbots is a very difficult business to value, as it's unprofitable and has a deficit tangible net worth. Given the financial condition of Talbots, its continued losses, and lack of financial flexibility, I would think that the Sycamore offer could be the best option for Talbots.
In December, Sycamore, which owns nearly 10% of Talbots, offered to buy Talbots for $3.00 a share when the company's stock was trading at $1.56. The December offer translated to about $208 million while the current bid hovers around $211 million. Talbots stock is currently trading around $2.65 per share, compared to $8.52 a share at the end of 2010.
Last year, Talbots announced plans to close about 110 stores through fiscal 2013, bring in new merchandising and marketing talent and rework its product line to get customers back.