Financially troubled women’s apparel merchant The Talbots has extended by one week its exclusivity agreement with private equity firm Sycamore Partners as both sides attempt to finalize a deal for Sycamore Partners to acquire Talbots’ outstanding stock.
Talbots rejected a bid from Sycamore Partners in December, but earlier this month Sycamore upped its offer from $3 a share to $3.05 per share to acquire outstanding stock of the company. Sycamore Partners’ offer in December translated to about $208 million; the current bid hovers around $211 million.
The exclusivity period according to the original agreement made May 5 will now expire on May 22, 2012. The Talbots Board of Directors is being advised in this process by its financial adviser, Perella Weinberg Partners, and legal adviser, White & Case LLP.
According to the extension agreement, there can be no assurance that any definitive agreement will be entered into, or, if entered into, what the terms would be, or this or any other transaction will be approved or consummated.
Chris Kampe, managing director with investment firm Tully & Holland, said the extended exclusivity agreement means that the two sides are trying to work out the deal, that Sycamore Partners needs more time, and Talbots is willing to give them more time.
In December Sycamore Partners, 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 since the announcement of the previous exclusivity agreement, Talbots’ shares have dropped 10%. “Stock price is a good barometer of whether the deal will actually get done,” Garver said.
Talbots’ stock is currently trading at $2.35 per share. “If the offer is accepted at $3.05 per share, there’s a possibility for a 30% gain,” Garver said. “If it is declined, there is a possibility of a 30% or more decline and it becomes a potential bankruptcy candidate.”
Garver thinks it’s unlikely there are other bidders to step in given exclusivity constraints.
Talbots has posted losses in four of the past five years. 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.