Sycamore Buying Chico’s for $1 Billion
This story was updated Sept. 28 at 4:47 p.m.
Sycamore Partners is continuing its push to consolidate in retail, scooping up Chico’s FAS Inc. with a $1 billion deal.
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The private equity firm agreed to pay $7.60 a share to take the 1,258-door retailer private, a 65 percent premium over the Chico’s closing price on Wednesday.
While that is a big premium, the stock, like many in the fashion space, has not been getting very much love from Wall Street lately. Before the deal, the company had an enterprise value of $966.2 million — just half of the retailer’s total revenues for the last four quarters.
The deal is expected to close by the end of the first quarter next year and will put the Chico’s, White House Black Market and Soma banners under Sycamore’s umbrella.
Molly Langenstein, Chico’s chief executive officer and president, said Sycamore shared “our commitment to providing solutions, building communities and creating memorable experiences to bring women confidence and joy. We look forward to working with the Sycamore Partners team to unlock Chico’s FAS’ full potential.”
Langenstein, who’s been leading the retailer since June 2020, has been focusing the business around four strategic pillars: being customer-led, product obsessed, digital first and operationally excellent.
That had the company’s objectives in sync with the broader perceptions of where fashion retailers in general need to get to. And Langenstein told analysts last month, “Full-price sales were healthy [in the second quarter] and each of our brands attracted new customers and gained market share. We believe we have compelling momentum as we enter the back half.”
But the deal — and the increased scale — Sycamore was offering was enough to push through a change.
Chico’s chairman, Kevin Mansell, added that: “The transaction reflects the board’s commitment to maximizing shareholder value. It provides Chico’s FAS shareholders with significant immediate cash value and creates exciting opportunities for employees of the company and our brands.”
Sycamore has a long history of dealmaking in fashion and retail, having previously cut deals for Ann Taylor, Lane Bryant, The Limited, Belk, Hot Topic, Talbots, Torrid, Coldwater Creek, Jones New York, Stuart Weitzman and more.
Some brands have moved on, like Stuart Weitzman, which is now part of Tapestry Inc. Some have gone bankrupt, like Belk. Some have gone public, like Torrid. And some are being reworked under Sycamore, which recently formed KnitWell Group to hold Ann Taylor, Loft and Talbots.
Stefan Kaluzny, managing director of Sycamore, said: “We are pleased to have reached this agreement with Chico’s FAS and its board of directors. We have long admired the company’s three iconic brands, including Chico’s, White House Black Market and Soma. We look forward to partnering with the company’s more than 14,000 talented associates to grow these brands by continuing to deliver excellent products and service to their devoted customers.”
This isn’t the first time Kaluzny has come knocking.
In 2019, he offered to buy Chico’s for $4.30 a share and then cut the offer to $3.50 and $3 as the retailer’s performance weakened, but no deal materialized.
While would-be acquirers came into 2023 wary about the economy, the consumer has held up under higher interest rates better than many hoped and the market and more wheeling and dealing is now possible.
Tapestry Inc. is buying Capri to form a $12 billion giant, Kering cut a deal to acquire high-end fragrance house Creed and took a minority stake in Valentino, and the IPO market is also heating up with Birkenstock in the final stages of an offering.
The Chico’s deal includes a 30-day go-shop period, giving Chico’s and its financial adviser Solomon Partners time to play the field and attract a better offer from another buyer.
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