Multichannel Merchant quotes Chris Kampe, Tully & Holland's Retail Group Managing Director, regarding Talbots rejection of Sycamore Partners' purchase offer.
December 21, 2011 - Earlier this month, private equity firm, Sycamore Partners offered to buy Talbots for $3 a share. Talbots turned down the offer from Sycamore (a 9.9% shareholder in Talbots) stating that the proposal is "inadequate and substantially undervalues the company," choosing instead to explore strategic alternatives. In the December 21, 2011 Multichannel Merchant article, Talbots Rejects Buyout Bid, Tully & Holland Managing Director, Chris Kampe, explains Talbot's alternatives and their likely reason for rejecting the bid.
Chris says exploring strategic alternatives is often a code phrase for seeking competitive bids from other prospective buyers.
"Despite the fact that the Sycamore offer was roughly twice what Talbots" stock had been trading at [$1.56 a share], it remains at a significant discount to what the stock had been trading earlier this year [$8.52 a share at the close of 2010]," Chris says.
Valuation can be more challenging for underperforming companies with negative trends, Chris adds. "Talbots had been trading at a discount to book value, but now trades at a premium to book value."
How long can Talbots hold out for a better offer?
"The board probably feels a fiduciary responsibility to at least seek other interest," Chris adds.