Still Waiting on J. Crew Sale

Feb 09, 2011 9:22 PM  By

Will J. Crew ever reach a deal to be sold? The revised “go-shop” period for the apparel cataloger/retailer to consider other bids for its business ends Feb. 15. But it doesn’t look like a final decision will be made by then.

The J. Crew Group announced In November it was being 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.

But several law firms immediately issued statements indicating they are investigating the deal on behalf of J. Crew’s shareholders, who didn’t feel the company was commanding a big enough price.

The investigations aim to determine whether J. Crew’s board of directors breached its fiduciary duties to its stockholders by failing to adequately shop the company before agreeing to the transaction. Shareholders filed complaints questioning whether J. Crew CEO Millard Drexler, who began negotiating with the buyout firms months before the deal became public, got a fair price from TPG and Leonard Green.

A lawsuit was filed late last year, then appeared to be resolved in mid-January until the settlement collapsed last week.

Sears and Urban Outfitters were said to have had a look at J.Crew’s books, but nobody made an offer. J. Crew initially had until Jan. 15 to solicit alternative proposals; that period was extended to Feb. 15 as one of the provisions to the lawsuit’s settlement beofre it fell apart.

Chris Kampe, managing director with investment firm Tully & Holland, says the question is how much of a “market test” did the shareholders of J. Crew really get? “This is a situation where there is some question of whether or not the board did enough to seek alternative offers.”

It appears that a few parties looked at J. Crew and Green was still the only offer, Kampe says. It’s hard to say how this will play out: “The lawsuit is a real issue,” he says.