After not finding any better offers, Fort Myers-based retailer Chico’s FAS is moving ahead with a plan to sell itself to a New York-based private equity firm for $1bn.
A “go-shop” period to seek better offers has expired and a required waiting period under federal anti-trust laws has ended, without issue, allowing the deal to move forward.
The sale still requires shareholder and regulatory approvals. With those approvals, the all-cash deal is expected to close by March.
In late September, Chico’s FAS, a publicly traded company, announced it had signed a definitive agreement to be acquired by Sycamore Partners, a private equity firm specializing in retail, consumer and distribution-related investments, subject to customary closing conditions and approvals.
“We are excited about the next chapter in our company’s future with the pending acquisition by Sycamore Partners. We believe they will provide Chico’s FAS with additional expertise, financial resources, and strategic flexibility to further fuel our growth. Our commitment to providing solutions, building communities, and creating memorable experiences to bring women confidence and joy is shared by Sycamore Partners. We look forward to working with them to unlock Chico’s FAS’s full potential,” said Molly Langenstein, the president and CEO of the specialty women’s retailer, in a statement.
Once acquired, the company would become privately held, and would no longer be listed on the New York Stock Exchange. It would answer to a new boss – and not shareholders.
Under the agreement, shareholders are to receive $7.60 per share in cash – a value that’s 65% higher than the closing price of the retailer’s common stock ahead of the acquisition announcement.
According to a filing with the U.S. Securities and Exchange Commission, a shareholder vote is scheduled for Jan. 3. A special meeting will be held virtually, where investors will be asked to approve the merger and an “advisory” proposal on compensation that certain executive officers of Chico’s could receive in connection with the merger, if they lose their jobs in good standing, or they decide to quit for good reason.
The “Golden Parachute” compensation could include severance payments ranging from more than $5.7m to about $1.17m.
At this stage, Chico’s FAS could face a nearly $30m termination fee, under certain circumstances, if the deal isn’t consummated as planned under the merger agreement.
In other news, the retailer announced third-quarter results “in line” with its outlook on Thursday.
“Our results reflect our team’s continued execution on our four strategic pillars of customer led, product obsessed, digital first, and operationally excellent,” Langenstein said in a statement.
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The company beat Wall Street’s expectations on earnings, but fell short on revenue.
Excluding merger-related costs, adjusted earnings came in at $13m, or 11 cents a share, two cents above the average estimate reported by Yahoo Finance.
Revenue totaled $505.1m, missing the average estimate by more than $7.5m.
In the same quarter a year ago, the company had $518.3m in revenue. The retailer attributed the year-over-year 2.5% decline primarily to a decrease in sales at its same stores, driven by a lower transaction count, partially offset by higher average dollar sales.
Same stores are those that have been open for at least a year.
The company ended the third quarter with $126.6m in cash and marketable securities and total liquidity of $361.7m, with $24m in long-term debt.
It reported $7.3m in merger-related costs during the third quarter.
Due to the pending acquisition by Sycamore Partners, Chico’s did not host its usual earnings conference call with analysts. It’s also not providing a financial outlook and has withdrawn its previously issued outlook for 2023.
The retailer has three distinct brands: Chico’s, White House Black Market and Soma, selling everything from career wear to underwear.
Established in 1983, the now-national chain got its start on Sanibel Island, with the opening of its first store. The 800-square-foot store sold Mexican folk art and cloth sweaters.
Founders Marvin and Helene Gralnick, who met in Mexico in 1971, quickly found a niche, selling to women older than 35, and grew their business into a retail force.
The Gralnicks are no longer involved in the company, having retired years ago.
Last year, Chico’s FAS was recognized by the National Retail Federation as the ninth-fastest growing retailer in the country.
As of October 28, the company operated 1,256 stores in the U.S. It also sells its merchandise through 58 international franchise locations in Mexico, through two franchise locations at U.S. airports and through brand websites.
Source: EU News-Press
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