Talbots talks with Sycamore Partners end with no agreement

HINGHAM, Mass., Fri May 25, 2012 – Shares of Talbots Inc. plunged as much as 36 percent on Friday after exclusive negotiations with Sycamore Partners ended without an agreement for the private equity firm to buy the women’s apparel retailer, which can now look for other deals.

Talbots said it remains open to pursuing a transaction with Sycamore at $3.05 per share, which would values the retailer at around $215 million, if the private equity firm can provide certainty over closing the deal and financing commitments. Talbots said Sycamore was not ready make a deal at this time.

The parties’ exclusivity agreement expired on Thursday.

Shares of Talbots, which is looking for a successor to its current chief executive, dipped as low as $1.64 in morning trading and later traded at $1.75, down 31 percent.

Talbots, which has about 540 stores in the United States and Canada, posted a slightly higher adjusted first-quarter profit on Friday as it worked on managing discounts, costs and inventory.

Cash-strapped Talbots, once a popular destination for its classic fashion, has been consistently lagging competitors Ann Inc. and Chico’s FAS Inc. Its sales have fallen five years in a row.

Talbots put itself up for sale and opened its books to Sycamore in January, shopping for a higher bid after rejecting the private equity firm’s initial offer of $3 per share.

Talbots is looking for a successor to outgoing CEO Trudy Sullivan, who unsuccessfully tried to reignite growth at the chain with new store formats and cost-cutting.

Top Talbots investor pans Sycamore Partners’ $3 a share bid

HINGHAM, Mass. ― Private equity firm Sycamore Partners’ $3 a share bid for Talbots Inc is “opportunistic and a very low offer,” a top investor in the ailing retailer said.

Sycamore, which owns 9.9 percent of Talbots, offered to buy it for about $212 million on Tuesday, when the company was worth about $110.3 million.

“The company’s numbers right now are distorted by merchandising issues,” Mitch Williams, a fund manager at OppenheimerFunds told Reuters.

Oppenheimer is the biggest institutional stakeholder in Talbot with a 11.9 percent stake, followed by Sycamore, according to Thomson Reuters data.

Williams refused to say what he would consider a fair valuation, but said any offer had to take into account Talbot’s historical performance and not just the recent past.

When asked about Oppenheimer’s stand, a spokesman for Sycamore Partners said the firm had no comment beyond what it said in its recent filing.

Founded in post-war Massachusetts, Talbots built its reputation on its traditional pearls-and-classics fashions, but is widely seen as dull today.

Shares have dropped from the $30-levels they used to trade at a decade ago to around $1.56 just prior to Sycamore’s bid. They shot up to $2.80 on the New York Stock Exchange Thursday.

The retailer has lagged peers Ann Inc and Chico’s FAS, as it tried and failed to attract younger shoppers, while alienating its core older customers in the process.

On Monday, Talbots said it was looking for a new chief executive to replace Trudy Sullivan, four years after she took charge.

Sales have fallen steadily over the past three years, and some investors and analysts have long been expecting a sale.

“Talbots’ business trends have been among the weakest in a struggling women’s retail sector,” Nomura Securities International analyst Paul Lejuez wrote in a note titled “Talbots – Take The Money and Run.”

The analyst also said he did not expect the offer to be raised meaningfully, given the 92 percent premium.

Eric Kuby, chief investment officer at North Star Investment Management Corp, who exited the stock before Sycamore’s offer said: “On the basis of where the company is going and what the stock is doing, it is a reasonable offer.”

“But on the basis of what the stock could be worth if they got things turned around, it’s a very low offer.”