For the second time in a week, financially troubled women’s apparel merchant The Talbots has extended its exclusivity agreement – this time by 48 hours — with private equity firm Sycamore Partners as both sides attempt to finalize a deal whereby Sycamore would acquire Talbots’ outstanding stock.
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Talbots will mull over Sycamore Partners’s $211 million offer until Thursday.
Talbots’ shares finished at $2.32 in trading on Tuesday and currently are around $2.50 per share.
Abe Garver, principal at Focus Investment Banking, said a deal appears imminent. But he’s not sure what Sycamore Partners, which owns nearly 10% of Talbots, would do with Talbots.
“If I’m Sycamore I view Talbots as a restructuring/reorganization play,” Garver said. “I don’t believe the business is viable with $140 million in debt, which is what is parked on the balance sheet right now. That’s the tricky part about buying equity in this company. The debt load and legal liabilities related to the sale process, not to mention employee morale, are major hurdles to overcome.”
Chris Kampe, managing director with investment firm Tully & Holland, believes the 48-hour extension is due to both sides trying to reach an agreement.
Talbots rejected a bid from Sycamore in December, but earlier this month Sycamore Partners upped its offer from $3 a share to $3.05 per share to acquire outstanding stock of the company. Sycamore’s offer in December translated to about $208 million; the current bid hovers around $211 million.
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.
The company tried to reverse its downward spiral by cutting jobs, closing stores, lowering inventory, limiting marketing spending and trimming employee hours. But Talbots continues to look for other solutions to its woes. Its management has said it is considering all its strategic alternatives and is seeking a new leader for the company.
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.
Jim Tierney ([email protected]) is a senior writer for Multichannel Merchant. You can connect with him on Twitter (TierneyMCM) and LinkedIn, or call him at 203-358-4265.