Restoration/Catterton Deal Advances

Looks like Sears was spurned again. One day after the expiration of a “go shop” period, Restoration Hardware on Feb. 29 opted to complete its merger plans with private equity firm Catterton Partners.

According to the terms of the agreement, all outstanding shares of the home furnishings cataloger/retailer, other than those exchanged by certain stockholders participating with Catterton in the transaction, will be acquired for a price per share equal to $4.50 in cash. The total equity value of the transaction hovers around $179 million.

By pursuing its merger plans with Catterton Partners, Restoration Hardware rejected the latest offer from Sears Holding Corp. for $4.55 per share, which came on Feb. 28–the last day of the go shop period.

Corte Madera, CA-based Restoration Hardware’s independent committee determined that the current Sears Holdings proposal was “not reasonably likely to result in a superior proposal under the terms of the agreement and plan of merger because, among other considerations, the proposal was subject to significant uncertainties compared to the agreement and plan of merger.”

Department store retailer Sears had made a $6.75-per-share offer in November for Restoration Hardware. It subsequently withdrew that offer after Restoration’s shares tumbled and a competing bid from Greenwich, CT-based Catterton Partners was lowered to $4.50 per share.

In the Jan. 24 amended agreement, Restoration Hardware extended the outside termination date for the deal from April 30 to June 30. It also changed the definition of material adverse effect to increase the likelihood that the transaction will close if Restoration, which includes about 100 stores, catalogs, and a Website, experiences weakness in its results.

What’s more, Catterton Partners, through its affiliates, has provided a $25 million subordinated loan to Restoration Hardware for working capital purposes. The loan is not contingent on the closing of the acquisition and has been funded.

Most observers agree that Catterton is a better fit for the merchant that Sears would have been. “The team at Restoration Hardware and Catterton have formed a strong partnership and the Catterton team seems to buy into management’s plan,” says Lee Helman, managing director with New York-based investment bank Financo. “At the same time, while Sears has a lot of reasons to pursue Restoration Hardware, I assume that management weighed in and preferred the Catterton alternative.”

Says Stuart Rose, managing director with Wellesley, MA-based investment bank Tully & Holland: “Despite a marginally higher valuation, the parties finally came to their senses. Whether it was Sears putting in a marginal bid or the Restoration board realizing a true private equity group would be a better route, the right partner ended up winning the auction.”

Partner Content

Hincapie Sportswear Finds Omnichannel Success in the Cloud - Netsuite
For more and more companies, a cloud-based unified data solution is the way to make this happen. Custom cycling apparel maker Hincapie Sportswear has leveraged this capability to gain greater visibility into revenue streams, turning opportunities into sales more quickly while gaining overall operating efficiency. Download this ecommerce special report from Multichannel Merchant to more.
The Gift of Wow: Preparing your store for the holiday season - Netsuite
Being prepared for the holiday rush used to mean stocking shelves and making sure your associates were ready for the long hours. But the digital revolution has changed everything, most importantly, customer expectations. Retailers with a physical store presence should be asking themselves—what am I doing to wow the customer?
3 Critical Components to Achieving the Perfect Order - NetSuite
Explore the 3 critical components to delivering the perfect order.
Streamlining Unified Commerce Complexity - NetSuite
Explore how consolidating multiple systems through a cloud-based commerce platform provides a seamless experience for both you, and your customer.