Retailers, Equity Firms Consider J. Crew Bids
When we last visited J. Crew in November, the company had
announced it would be acquired by TPG Capital and Leonard Green & Partners
in a cash deal valued around $3 billion ($43.50 a share). At the time, 57 percent
of respondents to a RetailWire poll said the deal would be good for
J. Crew. Only 24 percent thought the deal was a mistake.
One of the key aspects
of the deal from the point of view of analysts and industry experts was that
Mickey Drexler, CEO of J. Crew, would stay on and continue working his merchandising
magic for the company.
But almost as soon as the deal was announced, questions
were raised about Mr. Drexler’s dealing with the would-be buyers. Negotiations
between Mr. Drexler and the equity firms went on for seven weeks before he
notified J. Crew’s board.
Now, a new Bloomberg News report suggests
that the previous deal may not be done as two retailers, Sears Holdings and
Urban Outfitters, and two unidentified private equity firms are looking at
possibly submitting their own bids for J. Crew.
A bid by Sears was quickly
dismissed by analysts.
Christine Chen, an analyst with Needham & Co., told Bloomberg, “J.
Crew is positioned as aspirational and Sears is not. It would have a negative
impact on the J. Crew brand.”
Brian Sozzi, an analyst with Wall Street
Strategies who follows Urban Outfitters, said in a research note that acquiring
J. Crew would “give the eclectic
retailer a higher income customer base (less college kid more 25-35 year old),
more mall-based stores, and greater leverage over suppliers at a time of input
Mr. Sozzi did not think Urban Outfitters was likely to make
the deal because it would leverage the company’s balance sheet, J. Crew had
a lower return on assets and did not provide any international exposure. He
also said Urban Outfitters “has
an affinity for developing its own brands.”
Both TPG and Leonard Green
stand to profit even if another bid is eventually accepted by the retailer.
J. Crew would have to pay $27 million to the firms if their deal does not go
- Sears, Urban Outfitters Said to Weigh Bids for J. Crew
in Challenge to TPG – Bloomberg News
- Sears and Urban Outfitters Circle J. Crew – The New York Times
What do you think is the ideal acquisition scenario for J. Crew? Finances aside, which management situation do you think would be most beneficial?