Ascena looks to LOFT sales with $2.15 billion Ann Inc buy

Reuters News
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Posted: May 18, 2015 7:43 AM

By Ramkumar Iyer

(Reuters) - Ascena Retail Group Inc, which runs Lane Bryant and Dressbarn women's clothing stores, is to buy Ann Inc for $2.15 billion, mainly for the popular LOFT brand, which offers everyday fashion to a wide age group.

LOFT's dresses, office wear and accessories are aimed at women between 18 and 60 years old, while each of Ascena's five brands cater to a comparatively narrower age group.

LOFT will become Ascena's largest brand, accounting for 22 percent of the combined company's revenue, and along with Ann Taylor will account for a little over a third of total revenue, according to a presentation on Ascena's website.

Ascena has fueled much of its growth through acquisitions and after this deal, will operate nearly 5000 stores, with sales more of than $7.3 billion in 2014, to become one of the largest women's apparel retailers in the United States.

Ann's shares were up 19.2 percent at $46.12 in afternoon trading on Monday. They touched a record high of $47.20, just above Ascena's offer of $47 per share – $37.34 in cash and 0.68 in stock. Ascena's shares were down 2.1 percent at $13.91.

Ann's same-store sales have fallen in three of the past four quarters as it struggles with increasing competition from fast-fashion chains and a pullback in discretionary spending.

Under pressure from shareholders, hedge funds Engine Capital LP and Red Alder LLC, to sell itself, Ann hired JP Morgan to explore a sale, Reuters reported in August.

Around that time, Golden Gate Capital picked up a stake in Ann to become its largest shareholder, saying the stock was undervalued.

The company's problems have been compounded in recent months by disruptions at West Coast ports, which has hit sales and led to higher costs.

The transaction gives Ann an enterprise value of about $2 billion, Ascena said in a statement on Monday.

Ascena said it expects the deal to "significantly" add to earnings in the first year after the deal closes and to boost profit by more than 20 percent after that.

The deal is expected to close in the second half of 2015, after which Ann stockholders will own about 16 percent of Ascena.

Ascena said Goldman Sachs and Guggenheim Securities, its financial advisers, have arranged committed financing of up to $2.4 billion.

Ascena's legal adviser is Proskauer Rose LLP, while Ann's is Wachtell, Lipton, Rosen & Katz.

(Editing by Savio D'Souza)