J. Crew Sold, Unhappy Shareholders Launch Investigations

Nov 24, 2010 4:25 AM  By

Apparel cataloger/merchant J. Crew Group announced today that it will be acquired by funds affiliated with TPG Capital and Leonard Green & Partners for $43.50 per share in cash, or a total of nearly $3 billion.

Millard Drexler will continue as chairman/CEO of J. Crew and maintain a significant equity investment in the company, the company said in a press release.

The merchant released its third-quarter financials today as well, and said its revenue increased 4% to $429.3 million. Its direct sales rose 12% to 117.9 million.

Shortly after the company announced the deal, several law firms issued statements indicating they are investigating the deal on behalf of J. Crew’s shareholders.

The investigations aim to determine whether J. Crew’s board of directors breached their fiduciary duties to its stockholders by failing to adequately shop the company before agreeing to the transaction, Another issue is whether J. Crew has disclosed all material information to shareholders about the proposed transaction.

According to one firm that launched an investigation, Dallas-based The Briscoe Law Firm, analysts have projected the true inherent value of J. Crew/JCG shares to be at least $50.00 per share.

But J. Crew says the acquisition price reportedly represents an approximate 29% premium over its average closing price the month prior to the acquisition announcement.

According to Google Finance, J. Crew shares were worth 31.68 on Oct. 22. Shares traded for 37.65 on Nov. 22, and rose to $43.99 after the close today.

TPG Capital acquired J. Crew in 1997 and took the merchant public in June 2006. In opened its initial IPO on the New York Stock Exchange at $20 a share.

J. Crew is #50 on this year’s MCM 100, with $428.2 million in direct sales in 2009.