Women's clothing chain Talbots Inc. said Tuesday that it plans a complex refinancing deal that will let it buy out its majority shareholder, lower its debt by about $330 million and continue its turnaround.
In the deal, which involves buying a company holding $350 million in cash, Talbots will acquire the stake of Japan-based Aeon (U.S.A.) Inc.
The deal will repay $491 million Talbots borrowed from Aeon and some Japanese banks and retire Aeon's 29.9 million Talbots shares. Aeon will get also 1 million warrants but will own no equity in Talbots.
Talbots is issuing new shares to raise the cash to buy BPW Acquisition Corp., an American Stock Exchange-listed company that has about $350 million in cash. Existing BPW shareholders will receive 0.9 to 1.3235 Talbots shares in exchange for each BPW share.
BPW is a special-purpose acquisition company, also known as a "blank check," formed with the intent of buying other companies. It's unusual for such a company to be acquired.
Once the deal closes, current BPW shareholders will own between 60.4 percent to 69.1 percent of Talbots, and current Talbots shareholders will own 30.9 percent to 39.6 percent of the company's shares.
Talbots also announced a new $200 million senior secured revolving credit line from GE Capital to help pay for the deals.
The retailer also reported a third-quarter profit Tuesday that significantly beat Wall Street's expectations. And it forecast a smaller fourth-quarter adjusted loss from continuing operations than analysts anticipated.
The company's stock rose $1.02, or 14.2 percent, to close at $8.23 Tuesday. The shares have traded in a 52-week range of $1.45 to $12.
Talbots had 589 of its namesake stores in 46 states, the District of Columbia, and Canada at the end of the third quarter.