Sycamore Partners Offers $212 million for Talbots

Dec 07, 2011 11:35 PM  By

Troubled women’s apparel and accessories merchant The Talbots received an unsolicited letter from private equity firm Sycamore Partners on Tuesday – an offer of $212 million for the underperforming retailer.

The news comes one day after the company hired an executive search firm to find a successor for president/CEO Trudy Sullivan, who said she will retire once her replacement is secured.

Sycamore Partners, which owns 9.9% of Talbots, offered to buy the company for $3 per share. Talbots’ stock has dropped 82 percent this year.

“As one of Talbots’ largest shareholders, we are concerned by the company’s rapidly deteriorating performance,” Sycamore wrote in a letter to Talbots. “We believe we are not alone in our concerns about the company’s current condition and future direction,” Sycamore said in a letter to Talbots.

Sycamore Partners was founded in 2011 by Stefan Kaluzny, formerly with Golden Gate Capital. Kaluzny’s past portfolio companies at Golden Gate included Apogee Retail, Eddie Bauer, Express, J. Jill Group, Romano’s Macaroni Grill, Orchard Brands and Zale.

Talbots continues to suffer from severe same-store sales declines each quarter, says Chris Kampe, managing director with investment firm Tully & Holland. “Gross margins have been negatively impacted by markdowns and promotions. The result has been further declines in profitability.”

This year has been particularly disappointing, Kampe says, “given that Talbots during 2010 appeared to be on the mend. Recent results show deteriorating trends. Talbots has largely burned through its cash on hand this year.”

Management is trying to right the ship through cost cutting, store remodels, and by closing underperforming stores, Kampe adds. While these are all the right things, “the chain probably needs to be a lot smaller to be successful and needs to regain its core customer.”