Golden Gate Sells J. Jill

Less than two years after it acquired J. Jill, private equity firm Golden Gate Capital announced today it has sold a majority stake of the women’s apparel merchant. The buyer is Bahrain-based global investment firm Arcapita Bank, which paid an undisclosed amount.

Golden Gate will remain a minority shareholder in the company, according to a statement, and J. Jill president/CEO Paula Bennett will continue to lead the Quincy, MA-based cataloger/retailer.

J. Jill has been passed around a lot in the past five years. Apparel merchant The Talbots bought it for $517 million in 2006, and put it back on the market in late 2008. Golden Gate Capital acquired all of the J. Jill assets in June 2009 for a mere $75 million.

Why is Golden Gate shedding J. Jill now? The timing might be right: Although it’s been a difficult climate for specialty retailers, Neil Stern, a retail analyst and senior partner for consultancy McMillan Doolittle, says the sector is looking attractive again—particularly to private equity investors as the economy recovers.

What’s more, while Talbot’s had focused on increasing J. Jill’s store base, “J. Jill’s business improved markedly during Golden Gate’s ownership, most likely weighted in growth in the catalog and online business,” says Chris Kampe, managing director with investment firm Tully & Holland. This is allowing Golden Gate “to exit with a healthy return,” Kampe says.

What is Arcapita likely to do with J. Jill? “I’m not sure that they are bringing anything earth-shattering to the table, other than their capital,” Kampe says.

As with most private equity buyers Arcapita will probably offer an incentive plan that provides management with enormous potential rewards for growth and successful exit in the future, Kampe says. The firm will also likely provide “an organized planning process that refocuses the target company on key value drivers, such as operational efficiencies and aggressive growth,” he says.

Arcapita focuses on acquiring companies in the $300 million to $1 billion transaction size range, Kampe says. He believes Arcapita will support J. Jill’s current management team’s growth strategy and probably seek to exit at a higher price in three to five years.

Meanwhile, Golden Gate is also trying to sell Orchard Brands, a conglomerate of 17 catalogs that target mature consumers. Orchard Brands, which had filed for Chapter 11 in January, is expected to emerge from bankruptcy sometime in April.

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