After troubled women’s apparel merchant The Talbots rejected a bid from private equity firm Sycamore Partners in December, Sycamore has upped its offer from $3 a share to $3.05 per share to acquire outstanding stock of the company.
Besides receiving the submitted bid, Talbots entered into an exclusivity agreement with Sycamore Partners in connection with the non-binding proposal, which will terminate on May 15. Sycamore’s offer in December translated to about $208 million; the current bid hovers around $211 million.
Talbots is still seeking to replace president and CEO Trudy Sullivan, who will remain until her successor is named. Sullivan unsuccessfully tried to revive the company with new store formats, cost cuts and targeting a younger customer.
In December Sycamore, which owns nearly 10% of Talbots, offered to buy Talbots for $3 a share when the company’s stock was trading at $1.56. Talbots opted to explore strategic alternatives, which has led it back to Sycamore. Talbots’ stock is currently trading around $2.65 per share, compared to $8.52 a share at the end of 2010.
Abe Garver, prinicipal at Focus Investment Banking, said Sycamore’s offer is on the high side but the acquisition seems like a priority for Sycamore.
Chris Kampe, managing director with investment firm Tully & Holland, said Talbots has endured serious financial difficulties – posting losses in four of the past five years. “To fund these losses, Talbots burned through most of its cash and leveraged its balance sheet by taking on additional debt,” Kampe said. “Efforts to stem the losses, including reducing payroll, closing underperforming stores, and reduced advertising costs, have not been sufficiently successful.”
Kampe said Sycamore’s current offer isn’t high by takeover standards. “Talbots is a very difficult business to value, as it’s unprofitable and has a deficit tangible net worth. Given the financial condition of Talbots, its continued losses, and lack of financial flexibility, I would think that the Sycamore offer could be the best option for Talbots.”
Last year Talbots announced plans to close about 110 stores through fiscal 2013, bring in new merchandising and marketing talent and rework its product line to get customers back.