Golden Gate Gets J. Jill

Private equity firm Golden Gate Capital announced today that, through an affiliate called Jill Acquisition, it has acquired all of the J. Jill assets from women’s apparel merchant The Talbots for $75 million.

Talbots, which had acquired J. Jill for $517 million in February 2006, announced plans to sell the division in November. “This is a significant strategic step forward for Talbots as it enables us to focus our time, resources and attention exclusively on rejuvenating our core Talbots brand and return to profitable growth,” Talbots president/CEO Trudy F. Sullivan said in a release.

J. Jill president Paula Bennett and her team “have made tremendous progress in improving the J. Jill brand merchandise and its creative presentation across all channels of business,” Sullivan continued. “We are confident that Golden Gate Capital will be an excellent partner to help J. Jill achieve its true long-term potential.”

Golden Gate Capital has in the past five years, completed about 20 multichannel retail acquisitions totaling more than $3.5 billion in annual revenue. It owns owns Orchard Brands, a multititle mailer of catalogs that target consumers over age 55.

The closing is scheduled to occur in the second quarter of fiscal 2009. The Board of Directors of Talbots unanimously approved the transaction, which includes the transfer of certain assets and liabilities to the buyer, including the Tilton, NH, distribution facility, sublease of a portion of the Quincy, MA, office facility, and substantially all of the brand’s intellectual property and inventories. Bennett will continue to lead J. Jill, which will operate under the same brand name and remain headquartered in Quincy.

The new owner will get 204 of the existing 279 J. Jill brand store leases and will continue to operate them. Talbots will retain the remaining 75 J. Jill store leases and is expected to close them within the next 60 days.

Troubled Talbots reported a $560.7 million net loss during its 2008 fiscal year, a significant deepening of the $188.8 million loss it took during 2007. The apparel marketer’s sales slipped from $1.71 billion in 2007 to just under $1.5 billion. Talbots’ most recent fiscal year ended Jan. 31.

“There must be some synergies that Golden Gate plans to avail itself of between J. Jill and Orchard Brands,” says Lee Helman, managing director with investment firm Financo. “Otherwise it doesn’t make sense as a standalone investment.”

J. Jill had a great direct business before expanding heavily into retail, Helman notes. “Golden Gate paid a full price for a business that has lost a fair amount of money in the recent past. It will be interesting to see how J. Jill and Orchard Brands ultimately are related to one another.”

Stuart Rose, managing director with investment firm Tully & Holland, adds that Golden Gate has a strong history of buying troubled businesses. “Of course, it’s the realization of the disappointment this acquisition was for Talbots,” he says.

Talbot’s paid over $500 million for that acquisition just a few years ago, Rose says, “so this acquisition heaped trouble onto the company as it lost focus, absorbed millions of operating losses, and lost big on the sale.”

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