Talbots Rejects Buyout Bid

Troubled women’s apparel and accessories merchant The Talbots has rejected a $212 million buyout offer from private equity firm Sycamore Partners.

On Dec. 6 Sycamore, which owns 9.9% of Talbots, offered to buy Talbots for $3 a share when the company’s stock was trading at $1.56. Instead, Talbots is exploring strategic alternatives.

Talbots said in a statement that the Sycamore proposal was “inadequate and substantially undervalues the company.”

Talbots has been looking for a new chief executive to replace Trudy Sullivan, who unsuccessfully tried to revive the company with new store formats, cost cuts and targeting a younger customer.

Talbots’ stock has dropped 82% this year. At the close of 2010, Talbots’ stock was worth $8.52 a share.

Chris Kampe, managing director with investment firm Tully & Holland, 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, it remains at a significant discount to what the stock had been trading earlier this year,” Kampe says.

Valuation can be more challenging for underperforming companies with negative trends, Kampe 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,” Kampe adds.

Jim Tierney (jim.tierney@penton.com) is a senior writer for Multichannel Merchant. You can connect with him on Twitter (TierneyMCM) and LinkedIn, or call him at 203-358-4265.

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